Darby Overseas Investments, the private equity (PE) arm of Franklin Templeton Investments, is gearing for two important exits. According to sources, Darby is set to exit from Amalgamated Bean Coffee Trading Co Ltd, which runs India’s largest cafe chain, Cafe Coffee Day, and Bhoruka Power, a company engaged in renewable energy.
Darby has invested $25 million in Cafe Coffee Day and about $18 million in Bhoruka Power. The PE firm made the investments from its $300-million Darby Asia Mezzanine Fund II during mid-2008, just before launching its $147-million India focused fund.
According to sources, Darby is looking at an internal rate of return (IRR) of 17-18 per cent each from both the investments. Investment bankers in the know say it is most likely that Cafe Coffee Day promoter V G Siddhartha will be buying back the stake from Darby, while a fresh investor would pick up the PE firm’s stake in Bhoruka. Darby did not comment on the impending transactions.
Some of Franklin Templeton/Darby Overseas’ investments in India
|Career Point||$10.4 mn|
|Amalgamated Bean Coffee Trading||$25 mn|
|Escorts Construction Equipment||$17 mn|
|Bhoruka Power||$18 mn|
|Kimaya Fashions||Rs 60 cr|
|SFO Technologies||Rs 68 cr|
|GKC Projects||Rs 60 cr|
|Investments done through the Asia fund are in dollars while others are from a rupee fund
Source: Darby Overseas Investments
Darby’s will be the second major exit Cafe Coffee Day will be giving to its initial investors. During June-July 2012, the coffee chain had provided a healthy 18 per cent IRR to Sequoia Capital, which had invested a total of $20 million in two tranches of $10 million in 2006 and 2007. Siddhartha had raised debt of Rs 125 crore to buy back the stake from Sequoia, with a combination of Rs 100 crore of non-convertible debentures and loans worth Rs 25 crore.
Bangalore-based Bhoruka Power is among the top small hydro power producers in India, having implemented 120 Mw consisting of 15 hydro stations and three wind power plants, and is on track to add another 50 Mw.
However, due to lack of adequate water supply at some of its stations last year, Bhoruka Power had to go slow on expansion plans.
Darby manages a range of PE, mezzanine, and infrastructure funds in Asia and Latin America as well as Central and Eastern Europe. Darby Overseas Investments was founded in 1994 by Nicholas F Brady, who served as US Treasury Secretary during 1988-1993. In 2003, Darby became a fully owned subsidiary of Franklin Resources, a global investment management organisation operating as Franklin Templeton Investments.
In late 2008, it raised a $147-million India-focused fund in record time from high net worth individuals in India under Franklin Templeton Private Equity Strategy to make investments in high growth, mid-size unlisted companies in areas such as infrastructure, manufacturing, and consumer goods.
Besides Cafe Coffee Day and Bhoruka Power, Darby has invested in Escorts Construction Equipment, Career Point, Kimaya, Electrosteel Steel, GKC Projects, Newgen Knowledge Works, Noida Toll Bridge and SFO Technologies.