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Ashmore leads as others quit high-valuation Milestone race

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What was expected to be a race to the finish is turning out to be a damp squib, as only one suitor is left to acquire Milestone Capital, the real estate-centric fund with assets of Rs 4,000 crore under management. According to three independent sources, only Managers is still in the race with others opting out due to the high valuation expectation of the family of Ved Prakash Arya, the late promoter of Milestone Private Equity Advisory.

The fund has been put on the block after Arya’s untimely death in an accident in August last year.

Sources said with the promoters asking for around Rs 280 crore ($55 million) or around seven-eight per cent of the fund’s AUM, most potential suitors such as Dewan Housing Finance, Hong Kong-based Pacific Investments, Edelweiss Capital, or even the Burmans of Dabur and their fund Elephant Capital have opted out. Even existing stakeholders like Religare Enterprises, with whom Milestone has a joint venture, have decided to back off.

Marquee AMCs like Tata Capital, L&T Finance or real estate funds like Kotak Real Estate Fund, who had shown interest earlier, had opted out much earlier. The limited time given for due diligence is believed to have also acted as a spoiler. The Arya family had mandated Standard Chartered Bank to help them in the sale process as an advisor.

“There are landmines on every step of the way,” said a CEO who withdrew from the bidding process recently. “They wanted to have a lot of indemnity with them and also the number of intangible assets with them is unbelievably high,” he added.

Others echo similar view. Without disclosing more details, another fund manager who decided to exit said, “There are a lot of complications in the business and we didn’t get enough time for a proper due diligence.”

When contacted, an Ashmore spokesperson said, “We don’t comment on individual deals.” A Milestone spokespersons told Business Standard, “It would be premature to discuss this at this stage.” Standard Chartered declined to comment.

The London-based Ashmore manages about $60 billion globally. Ashmore has exposure to global real estate markets through various funds- Everbright Ashmore China Real Estate Fund and VTBC Ashmore Russian Real Estate Partners.

In India, Ashmore operates on its own as well as through a joint venture with Alchemy Partners LLP, named Ashmore Alchemy India. As one of its leading investment in India, Ashmore Alchemy holds about four per cent stake in Manappuram Finance, through AA Development Capital India Fund I LLC.

In India, Ashmore has investments in Gurgaon-based apparel retail firm Numero Uno Clothing and Siesta Logistics Corporation Ltd and education firm-SEED Infotech. Last year, Ashmore had joined with other PE majors-Everstone Capital Management and Goldman Sachs to form an NBFC-Indostar Capital. But it has been seeking to expand its real estate portfolio.

Milestone’s largest exposure is towards real estate development and asset management where it has a joint venture with IL&FS. Milestone also has an existing joint venture with Religare to manage private equity investments in education and health care. Noel Tata is an investor in Milestone’s real estate JV with IL&FS, which invests mainly in rental yielding properties.

Milestone, under Arya, was looking at crossing Rs 4,500-5,000 crore in AUM this financial year itself. It was also seeking to raise a new fund for real estate development, which would make last mile investments into projects nearing completion in the top six cities. Another fund for niche infrastructure projects was also on the cards in 2012.

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