Qatar Investment Authority (QIA), one of the largest sovereign funds based out of West Asia, is in discussion with Violet Arch Capital Advisors, a financial services start-up, for acquiring a minority stake. Apart from QIA, a few other PE firms are in negotiation with Violet Arch for fund infusion.
Violet Arch started its operations by acquiring Alchemy Shares & Stock Brokers from its promoters, including Rakesh Jhunjhunwala. Last year, Violet Arch roped in Berenson & Co, a leading New York-based merchant bank, as a strategic investor by selling around seven per cent stake. It has also tied up with London-based ISM Capital, set up by former Jefferies International chief executive Cliff Siegel. Kolkata-based SREI Group has a significant minority stake in Violet Arch.
Violet Arch has set up a full service investment bank across merger and acquisition, private equity (PE) advisory, equity broking and PE funds. Varun Bajpai, founder, Violet Arch, who also holds sixty seven per cent stake in the company, did not respond to queries while mail sent to QIA did not elicit any response.
Violet Arch, founded by Varun Baipai, former chief executive officer, SBI Macquarie Infrastructure Management Pvt Ltd, has hired a few industry veterans to scale up its business in areas of investment banking and NBFC operations. Violet Arch also plans to launch a Strategic Themes fund, a mix of offshore and domestic private equity fund with a corpus of $500 million.
Indraneil Borkakoty, former head of capital markets at Nomura, joined Violet Arch as managing director (MD) and head of investment banking. Ravi Agarwal, former MD (India operations) of the global hedge fund Spinnaker Capital, also joined Violet Arch as managing director — structured finance — in charge of the proposed NBFC operations.
Recently, a few diversified financial services firms as well as broking firms have raised funds through PE firms. PE major Carlyle has increased its stake in India Infoline and Edelweiss.
Deepesh Garg, MD, O3 Capital, said, "Though the equity broking space is tough and unable to raise funds, other areas such as NBFC and mezzanine funding is attractive and a lot of private equity firms have shown interest for minority stakes."
According to VCCedge, year 2011 witnessed four PE deals worth $51 million in the diversified financial services space against a single deal worth $2.2 million in 2010.
“Given the current scenario of limited liquidity, tightening screws by banks and dried up IPO market, demand for other funding sources is high,” Garg added.
Apart from deals by Carlyle, other deals in 2011 include Sanlam’s investment in SMC Global Securities and Brand Capital’s investment in Sumedha Fiscal Services Ltd.