YES Bank Ltd, a recent entrant into the private equity space in India, is planning to expand its portfolio by launching a buyout fund in the near future.
Though the value of the fund has not been decided as yet, the bank plans to launch it in three years’ time.
The bank has already announced four sector specific funds in the first phase, in the form of a $300-million cleantech fund, a $500-million infrastructure fund, a Rs 200-crore food and agriculture fund and a $250-million lifesciences fund. Other funds such as a buyout fund, a VC fund and a real estate fund will be launched post-2010.
Somak Ghosh, president, corporate finance and development banking, YES Bank, told FE, “The planned buyout fund might be turn out to be the largest ever fund of YES Bank.”
The bank aims to acquire majority stakes in corporate firms across sectors, and aims to bring the entire range of funds in its portfolio with the launch of the buyout fund.
“But we want to acquire investors’ faith before launching it. This will only be possible with the successes of other specialised funds which will be launched soon.”
According to experts, buyout funds have an advantage of exercising control over the business and allow greater operational maneuverability to investors to manage issues, particularly in times of disagreements with managers and distress.
Vivek Mehra, country head, corporate finance-private equity, YES Bank, said, “There is very limited buyout activity in the Indian market. Large international funds such as KKR and Blackstone have done a few deals. A few Indian funds have done a few buyouts as well.”
But the major limitation in terms of buyouts happening, he said, is the attitude of Indian family businesses and entrepreneurs in parting with control on what is often considered a family jewel.
Advantages of a buyout fund mainly encompass the ability to invest significant amounts for large doses of equity. They provide liquidity to promoters, a trend which is gradually taking shape with the Ranbaxy deal, said Mehra.
According to him, the first closure of the cleantech fund will be during the first quarter of the next calendar year. The fund will be deployed in a span of 2-3 years in 17-18 companies, he said.
Though other funds will be raised abroad, the food and agriculture fund will be a domestic fund.
The VC fund is aimed at smaller companies with a turnover of about Rs10-12 crore. “We want to enhance the businesses of companies having a business model with a social commitment,” said Mehra.
Source: Financial Express