Sage Capital plans private equity fund through joint venture

Sage Capital plans private equity fund through joint venture

Mumbai: Private investment firm Sage Capital Advisors Pvt. Ltd plans to form a joint venture (JV) with a financial services group to launch a private equity (PE) fund or its own fund, an official said on Wednesday.

“We are exploring a JV with a large financial services group as the platform will allow us to get quality investors," said managing director Manish Kanchan, adding that Sage would hold a majority stake in the planned venture. “We can even raise up to $1 billion (Rs3,940 crore) through this JV." Kanchan said the name of the partner and other details would be announced in a month’s time.

He also said the firm is talking with potential investors to launch a PE fund of around $200-250 million if the JV falls through. PE investment in India is expected to touch about $10 billion in 2007. Investment had more than tripled to $7.46 billion in 2006, from $2.26 billion in 2005.

Currently, the company functions as a proprietary fund with two investors and has invested Rs550 million in four unlisted firms dealing in logistics, infrastructure, real estate and jewellery. “All the firms will get listed in 2008," he said.

Kanchan also said Sage would not make any fresh investments as a proprietary investment firm, because proprietary money tends to run out and attrition becomes an issue since employees tend to leave for better career prospects.

“Moreover, a PE firm allows us to participate in larger deals," he said, adding that it would typically enter at forward earnings multiples of seven or eight and exit at 19-20 with an average time horizon of three years.

Sage plans to focus on small and medium enterprises (SMEs) in manufacturing, exports, base metals, logistics and infrastructure in tier I and tier II cities, but will steer clear of software services, media and retail sectors because they are more concentrated in the metros, Kanchan said.