)
India-focused private equity firm New Silk Route (NSR) might soon be able to shed its one-fund-wonder tag with a series of successful exits this year, which could help it gain goodwill and establish a successful record.
The private equity (PE) firm, which started investing in 2007 from its $1.4-billion maiden fund, was not able to get back to its investors as it went into trouble, with founders Rajat Gupta and Raj Rajratnam getting implicated in an insider trading case by a US court in 2009. Parag Saxena, the remaining founder, was left with the challenge of fresh investments and manage the portfolio to give a healthy return to investors.
The firm virtually had no return track record to show, with only a partial exit made in 2010, when portfolio company INX Media sold a part of its business to a strategic buyer. The maiden fund of the firm made its first successful exit this year when it sold its 49 per cent stake in financial services firm Destimoney for an estimated Rs 590 crore, providing it a three-times return on its Rs 200-crore investment in 2008. It sold the stake to Carlyle in a secondary sale transaction.
Other exits include partial sales such as a 15.1 per cent stake in regional cable service provider Ortel Communications for Rs 65 crore and a 17.3 per cent stake in VRL Logistics for Rs 298 crore, when they got listed.
"After a long gap, IPOs (initial public offerings) have turned out to be a good exit route in 2015," says Darius Pandole, partner at New Silk Route Advisors, who heads the Mumbai office of the firm. Cafe Coffee Day, another portfolio company of the firm, has filed an application for an IPO with the Securities and Exchange Board of India. A successful exit from the company could help NSR top the exit chart for PE firms this year.
While Saxena is still struggling to settle an ownership dispute with the estranged founders, his efforts to revive the fortunes of the firm have started paying off. Saxena had brought in former McKinsey Europe chief Herbert Henzler, former Visa International chairman William Campbell and former treasurer of the International Finance Corporation Nina B Shapiro, who helped the firm mange the fund and portfolio.
"Limited Partners (LPs) investing in PE funds in India have been demanding exits for the past few years. If this can be achieved in terms of significant realisations for LPs, additional capital is usually available," says Pandole about NSR's plan for a second fund.
Typically, these LPs look for a significant portion of their capital to be returned within a five-year period, at rates of return that justify the risk of investments in India. Saxena is ready to hit the fund-raising plan next year.
