Milestone gears up to come back on track

Deceased promoter's wife drops asset sale plans, decides to raise fresh equity from investors

Ruby Arya’s world came crashing down two years ago when her husband, Ved Prakash, was killed in a freak accident: a tree fell on him during his morning walk. The former global human resource head of Kingfisher Airlines suddenly found herself responsible for Milestone Capital Advisors, a private equity (PE) firm having assets worth Rs 4,000 crore. The family held 88 per cent equity in the venture set up in 2007.

A few months after the accident, Arya, 41, realised she was a stranger to the world that Milestone traversed and agreed with investors and the investment banking community that the only way out for Milestone was to sell the assets and wind up.

Two years down the line, however, Milestone is getting ready to raise fresh equity from investors.

“I had initially thought that I have to take care of the children and sell the business,” says Arya.

The change in heart was prompted by cold business logic. After a year of initiating the sale process, she found nobody was interested in the venture. Potential bidders were more interested in the portfolio that was suitable to them. “That’s when I realised that the potential in the business is huge and why should I not take the company to a level that Ved would have done had he been alive,” says Arya, who is an engineering graduate and an MBA from XLRI, Jamshedpur.

In September 2011, Milestone Capital’s assets under management (AUM) was Rs 4,070 crore, which came down to Rs 3,100 crore by June this year after the de-merging of Milestone Religare and Ecofirst businesses and after accounting for various disinvestments across all funds. Profit before tax (PBT) stood at Rs 21.11 crore in FY11 and Rs 22.14 crore in FY12 on an equity base of Rs 10 crore. Divestment from the fund is happening depending on the funds’ life.

Milestone still manages rental housing assets, invests in real estate in the form of debt, and hedges the investments in the form of a return agreement from the developer of two-and-a-half times the money lent. It also manages gold fund with some unique features.

Milestone Bullion Series-I (MBS-I) enables investors to take exposure to gold, silver and capital protected gold linked debentures. MBS-I was launched in June 2010 and was subsequently closed for subscription in October 2010 with an AUM of Rs 330 crore. MBS-I has been in the liquidation mode for the past one year since gold prices peaked.

Arya says she has not faced problems of the kind one faces when the founder-promoter exits a fund.

Usually, investors seek premature exits fearing safety of their investments and employees also tend to jump ship. As much as 95 per cent of employees are still with the company. Investors keep putting in money in funds that were opened before Ved’s sudden death.

Milestone is getting ready to get on to the next level. Next in line is raising fresh funds within a couple of months. Most probably, it will be a real estate fund with a size of over Rs 300 crore. The process to get an Alternative Investment Fund licence will be initiated shortly.

Had Sebi cleared the original plan, Milestone would have become the first fund to go for an initial public offer that was proposed when Ved was around. However, the company has now dropped that plan but Sumit Somani, head of business strategy and portfolio management services, says Milestone is not averse to using the small and medium enterprises platform instead of an initial public offering.

Arya is hopeful that things will improve. “I get inspiration from Ved who, I feel, is still around,” she says. Some investors seem to agree with that.