Mumbai: Hit by the meltdown in equity markets and a dearth of fresh capital from overseas investors, Mumbai-based iCAN Investment Advisors Pvt. Ltd, floated with much fanfare by Anil Singhvi, former managing director of Gujarat Ambuja Cements Ltd, has decided to significantly downsize its operations.
“We have told our investors not to allocate any fresh capital to India,” Singhvi, managing director and chief executive of iCAN, said in a phone interview. “When you have less of a portfolio to manage, and no fresh capital coming in, manpower needs are reduced.”
Singhvi holds 26% stake in iCAN, which invests in listed and unlisted firms in India on behalf of two portfolio management companies: Geneva-based Notz Stucki and Cie, and Paris-based Comgest SA.
iCAN’s plight is illustrative of the fate of investing firms hurt by a slowing economy and an underperforming market.
Fund managers and private equity investors Mint spoke to mentioned other funds that have started winding down, but Mint could not independently confirm their names.
A report by knowledge process outsourcing firm Evalueserve published in October 2007, at the height of the bull run, said 366 investment-related firms were operating in India, and another 69 had raised, or were in the process of raising, funds with plans to start operations soon.
Slowdown effect: Anil Singhvi. (Photograph: Ashesh Shah / Mint)
“My hunch is that this 366 could go down to 200 in the not-so-distant future,” said the head of a private equity fund that has operations in the US and India, who spoke on condition of anonymity. “I know many global funds that are packing up to get out of India.”
To be sure, only some of these funds may be doing so because of their inability to find investors. Others may have made a conscious decision to exit India as managers feel they cannot earn returns that justify their presence here, according to this person.
If returns are poor, the “carry”, or the share of profits that the fund manager derives, would also be negligible.
India’s benchmark index Sensex has fallen by at least 30% since January.
Still, not everybody is bearish about India.
“India still figures high on the agenda of global private equity,” said Srini Vudayagiri, managing director of Lightspeed Venture Partners, which recently closed Lightspeed VIII, an $800 million (about Rs3,500 crore) global fund that will also invest in India. “Many funds, however, need to rebalance their portfolios after losses they may have suffered in other parts of the world. To that extent, (their) allocation to India could get reduced.”
For example, a fund with a mandate to invest 70% of its portfolio in the US, and the remaining in other geographies, may have seen its US portfolio erode considerably. This means the fund has to reallocate its portfolio towards other geographies such as India, in order to maintain a 70:30 ratio.
Singhvi himself said he didn’t think things were uniformly bad. “While the media can see only black or white, having worked in the cement industry for 21 years, I can also see shades of grey.”
According to him, some funds may decide to opt out of India but others will come in.
Singhvi said iCAN would continue to hold its positions in firms, though its exposure to ABB Ltd and Siemens Ltd have been cut completely. Other firms that iCAN has invested in include ACC Ltd, Bharat Heavy Electricals Ltd, Blue Dart Express Ltd, Zodiac Clothing Co. Ltd, Housing Development Finance Corp. Ltd, Camlin Ltd, Larsen and Toubro Ltd and ITC Ltd. Singhvi declined to give the names of the private companies in which the firm has invested.
But its portfolio of $600 million, with about $60 million in unlisted firms, at the height of the bull run late last year, has dwindled to $300 million, said Singhvi. This is mostly due to a combination of value erosion in existing portfolio companies and paring down of exposure to some other companies, in addition to the repatriation of sales proceeds to overseas entities from Geneva and Paris.
With a smaller portfolio to manage, many of iCAN’s top executives have moved on. Investment analysts Mahesh Narvekar, Neha Pathak and Mitesh Kothari have left the company, while Jayesh Doshi, iCAN’s executive director, has joined bauxite mining company Ashapura Minechem Ltd.
Singhvi continues to be managing director and CEO of iCAN, but in June he took on the additional role as vice-chairman of the Anil Ambani-promoted Reliance Natural Resources Ltd to help set up the firm’s new cement business.
Manish Shah, responsible for iCAN’s research and investments, and investment analyst Vinay Bhandari are the other two core members of the team. They will continue at iCAN, said Singhvi.
All the 15 people who worked with iCAN have a stake in the firm, and will be eligible for the spoils whenever the firm decides to sell its holdings, said another person familiar with iCAN’s operations who did not wish to be named.
The Sekhsaria family, former promoters of Gujarat Ambuja, holds 10% stake in iCAN.