Mumbai: Private equity firm New Silk Route (NSR) is looking to return at least $500 million to its investors next year before it looks to raise a second fund, said a senior official of the fund, adding the immediate focus will be on exiting existing investments.
“We have returned $200 million to our investors this year. We are knocking on the door of 2016 and clearly we would like to liquefy these investments and realize them and that is certainly the biggest activity at NSR right now,” said Parag Saxena, founding general partner and chief executive officer at NSR. Saxena is in India for NSR’s offsite, which happens thrice a year.
The consensus within the team is that the fund should maximize the portfolio value and initiate initial public offerings (IPO) or strategic sales of its investee companies.
Of the 18 IPOs that have hit the markets this year, three were NSR-backed firms. It has part exited its investments in Ortel Communications Ltd and VRL Logistics Ltd.
Some exits have been more profitable than others. NSR had invested in Ortel Communications at Rs.100 a share and exited at Rs.181 per share, though it had to reduce the amount of shares it sold as part of the IPO due to a tepid response to the share sale.
In the case of VRL Logistics, NSR had bought shares at Rs.74.50 apiece but exited at a much higher price of Rs.205 per share. VRL Logistics has been among the most successful IPOs this year. The issue was oversubscribed 74 times and the company’s stock has more than doubled since its listing in April.
NSR continues to hold shares in VRL Logistics as it only partially exited its investment at the time of the IPO.
The fund has also sold its investment in Destimony Enterprises Pvt. Ltd to Carlyle Group for an undisclosed amount.
In some cases, such as Coffee Day Enterprises Ltd, NSR has chosen not to exit yet.
“The way I think about it is—where do we have a lot of our money invested and which will move the needle? This means exiting larger assets,” Saxena said. “That does not mean we are neglecting our smaller assets. In fact, some of the developments over the next six months will be in some of our smaller assets. But with the smaller investments, you can’t do much to move the needle of the fund.”
One of NSR’s smaller investments is a 26% stake in auto component manufacturer Rolex Rings Pvt. Ltd. NSR had invested $40 million in the company in 2007. It also has a minority investment in Reliance Infratel Ltd. According to media reports, Reliance Infratel is in negotiations to sell its tower company business and the sale may be concluded this month.
One large investment where NSR is mulling its exit options is Ascend Telecom Infrastructure Pvt. Ltd, in which it owns two-thirds of the company, said Saxena, adding that the fund has been controlling and operating the company since 2007.
NSR was founded in 2006 and has $1.4 billion under management, mainly in India and emerging economies in Asia. It has 17 publicly disclosed investments on its website. It did not make any investments in 2014.
Its last investment was in September 2013, when it acquired Mumbai-based chain of restaurants Moshes Fine Foods Pvt. Ltd through its portfolio company South Asia Gastronomy Enterprises Llc.
The fund has investments in consumer services, education, manufacturing and engineering, financial services, telecommunications and technology and infrastructure.
To be sure, NSR is not the only fund focussed on exits.
According to Venture Intelligence, a research firm, between January and June 2015, fund managers were able to return $5.5 billion through strategic sales, secondary deals and sale of shares in listed companies.
“There is no doubt that over the last 16-18 months, exit activity has picked up significantly and people are managing to exit investments which have matured through share sale or by selling them to late stage investors,” said Sanjeev Krishan, partner and leader for private equity and transaction services practice at PwC.