| Helios plans India 'Slumdog Millionaire' stock fund | |
| Bloomberg / June 03, 2009, 0:40 IST | |
Helios Capital Management Pte, the hedge-fund manager once backed by Tudor Investment Corp, plans to start a “Slumdog Millionaire” fund that will buy underperforming shares of Indian companies.
“We want to find slumdogs from the Indian equity markets who have the potential of becoming millionaires,” Samir Arora, founder of Singapore-based Helios Capital, said in an interview.
The firm plans to raise about $50 million by the end of July for its long-only Helios India Jai Ho Fund, Arora said. “Jai Ho,” which means “victory” in Hindi, is the Oscar- winning theme song from “Slumdog Millionaire,” a feel-good tale of a Mumbai orphan’s escape from poverty that scooped eight Academy Awards, including best picture, this year in Los Angeles.
The new fund comes after India’s benchmark Sensitive Index or Sensex has already jumped 54 per cent this year, making it the world’s sixth-best performer and partially reversing last year’s rout. The index surged a record 17 percent on May 18 as investors bet the ruling Congress party’s biggest election victory in two decades will enable it to ease foreign investment rules and sell state assets — policies stalled by Prime Minister Manmohan Singh’s communist partners in his previous term.
Even after the rally, there remain “some stocks that are worth picking,” said Munesh Khanna, managing director of investment banking at Centrum Capital Limited. in Mumbai.
“There are still a lot of companies in the mid-cap sector, in the second and third tier, that have been beaten up that still have a lot of potential,” he said.
Helios, which has five investment professionals, already manages an India-focused hedge fund, the Helios strategic fund, that bets on rising and falling stocks. Arora declined to provide details on the fund’s performance.
India-focused hedge funds, on average, rose 8.2 per cent from January till April, following a 52 per cent decline in 2008, according to Eurekahedge Pte.
The Jai Ho fund plans to start by investing in stocks that have fallen at least 50 per cent since the end of 2007, which marked the end of India’s five-year bull run, said Arora, who has been investing in Indian equities since 1993.
Nine of the 50 members of the broader National Stock Exchange of India Limited.’s S&P CNX Nifty index have lost more than 50 per cent since Dec. 31, 2007. These companies include Tata Motors Limited., the truck maker that owns Jaguar and Land Rover, and DLF Limited., the nation’s largest developer.
“There are many, many companies that have survived the past 18 months with dignity and we want to focus on such companies,” Arora said. “The idea is to buy stocks in companies that do not have life threatening debt, are sure shot survivors and have become cheap on some appropriate parameters.”
The Sensex’s members are valued at an average price of 2.7 times the book value of their assets, compared with an average of 4 times in the past three years.
Shares of firms that have seen strategic investors, such as company management or private equity firms, increase or take stakes in them over the past year will be targeted, Arora said.
“This universe is not super big but we plan to buy 25-30 names,” he said, declining to identify specific companies.
The manager plans to raise money from institutional investors in Europe and the US as well as wealthy individuals in the Middle East, Arora said.
In April, Helios bought back “in a friendly transaction” the 15 per cent stake that Tudor, the $10.5 billion Greenwich, Connecticut-based hedge-fund firm run by Paul Tudor Jones, held in the Singapore manager, Arora said.
Arora was the head of Asian emerging markets at Alliance Capital Management Holding LP, now known as AllianceBernstein Holding LP, and the chief investment officer of the US money manager’s Indian mutual fund business from 1998 to 2003.
He moved to Mumbai from New York in 1993 to help Alliance Capital set up its Indian mutual fund business, after the government opened its stock market to foreign investors. Hedge funds are private, lightly regulated pools of capital whose managers can buy or sell any assets, bet on falling and rising asset prices, and participate in profits from money invested.
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