Abraaj buy to give Cerberus Capital a foothold in India
Cerberus, a key distressed asset investor with over $50 billion of assets under management, is keen to set up a distressed assets and private equity business in India
Mumbai: Cerberus Capital Management, one of the world’s largest distressed asset investors with over $50 billion of assets under management, is expected to soon gain a firm foothold in India, as it closes in on the acquisition of the private equity business of Dubai-based Abraaj Group.
Last month, the New York-based investor reportedly made a $125 million bid for Abraaj’s private equity business. Abraaj Group, which manages nearly $14 billion for large institutional investors, including development agencies, is in a dispute with the investors over utilisation of funds earmarked for healthcare sector investments.
According to two people directly aware of the development, senior executives of Cerberus have recently met the Abraaj India team, which manages its portfolio investments.
“Cerberus is keen to set up a distressed assets and a private equity business in India, and the acquisition of Abraaj’s PE business delivers the right opportunity,” said the first person cited above, requesting anonymity.
Last year, Mint had reported that Cerberus Capital Management was one of the new names scouting the Indian market for investing opportunities in distressed assets.
India has put in place a new law, the Insolvency and bankruptcy Code, to resolve the massive bad loans problem facing the country’s banking industry.
Among those who visited in India included senior Cerberus executives Allen Ukritnukun and Matthew Hoffman, the first person cited above added.
Ukritnukun is head of European Credit and managing director of Cerberus European Capital Advisors, LLP, while Hoffman is a senior trader with the Global Distressed Products unit at Cerberus, according to the firm’s website.
In India, Abraaj has made a bunch of major investments in recent years.
In 2016, it had acquired a majority stake in Hyderabad-based hospital chain Quality Care India Ltd from global private equity firm Advent International for an approximate deal value of Rs1,700 crore, Mint had reported. Quality Care operates in Hyderabad, Secunderabad, Visakhapatanam, Raipur, Pune, Nagpur, Bhubaneswar, Jabalpur and Surat.
It had also invested $150 million in online grocery delivery service BigBasket in 2016. In 2015, Abraaj had tied up with Kumar Mangalam Birla-controlled Aditya Birla Group to set up a renewable energy platform under Aditya Birla Renewables Ltd. The Birla Group holds a 51% stake in the business and Abraaj holds the remaining 49%.
Abraaj’s troubles began earlier this year, when investors in its healthcare fund raised concerns of misuse of funds. Investors, including the World Bank and the Bill and Melinda Gates Foundation, had raised questions on unspent funds of $200 million, seeking to know if the funds had been used by the firm for its own purposes, The New York Times had reported in February. In May, Bloomberg had reported that a review by Deloitte had thrown up potential discrepancies in accounting in Abraaj’s others funds too.
Apart from Cerberus Capital, another US-based investor, Colony Capital, maybe be interested in Abraaj’s private equity business. On 19 June, Reuters had reported that Abu Dhabi Capital Management has made a conditional $50 million offer to buy Abraaj’s investment management business.
The dispute resulted in a split in Abraaj’s investment management business and the holding company. Its founder, Arif Naqvi, also stepped down from the day-to-day management of the private equity fund unit. The firm has also halted fresh investments
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