Samara Capital has invested 70 per cent of its $320-million second fund, raised in 2013-14, in six companies. Of this, five are controlled (or co-controlled) transactions and only one is minority investment.
This is in contrast to the $290 million raised by Samara in 2007, of which the first five investments were all minority and then the next six deals were equally divided between control and minority. The India-focused private equity (PE) fund invests in small and mid-size private companies, with an investment range of $15 to $100 million.
"We are seeing far more opportunities for controlled transactions than what was there during 2005 to 2008. So, we expect the percentage of such deals to only grow from here," says Sumeet Narang, founder and managing director. Controlled transactions are defined as owning significant stake that provides strong board representations and exit rights.
We didn't go into the market with a blind pool: Siddharth Parekh & Sumeet Nindrajog
IndiaMART raises Series-C funding
IFMR Capital initiates first capital market transaction for MUDRA
Enhanced capital spending likely
Smoke on Jet's Bengaluru flight to Mangaluru
Connaught Place world's seventh most expensive office market
COAI contests Trai clamp on differential data pricing
Reliance Games to play in Indian market again
Jaguar Land Rover opens Brazil facility
"As the size of the economy has grown, it is throwing larger opportunities, and PE industry as a whole has evolved in the past 10 years with better capabilities to handle control transactions," he says. In April, Samara Capital bought South African drug maker Adcock Ingram's India business for $22 million ( Rs 151 crore).
As large business groups focus on their core products and markets, they divest other assets and exit certain geographies. This is giving PE firms such as Samara more opportunities to do controlled deals. Adcock Ingram has branded generics business in dermatology and gynecology. Samara Capital has roped in R S Raghav, a pharma veteran who honed his skills at Lupin, to drive growth at Adcock Ingram.
Family succession planning is another reason for fuelling flow for buyout deals in the market. Besides, many firms where PE funds invested in the last 10 years are finding the promoters willing to exit.
"In the last decade, we have also built ability to identify and retain highest quality business leaders who can execute growth in PE environment. This has also helped us improve our number for control transactions," says Narang. Last year, Samara bought about half a dozen franchises for Yum! Brands' Pizza Hut, getting it about 300 stores of the fast-food chain.
A consortium of investors led by Samara Capital invested about Rs 200 crore in this transaction and put it under Sapphire Foods. Following this, last month it roped in Sanjay Purohit, India managing director for Levi Strauss, who has been tasked to head Sapphire Foods and drive its growth. Purohit will join Samara and Sapphire Foods from next month.
Other controlled (or co-controlled) transactions from the second fund include Rs 70-crore investment made in Hyderabad-based Paradise Food Court in 2014. Samara Capital has partnered with the founders to expand the popular biryani restaurants to other cities. In the same year, it also bought a 45 per cent stake in India operation of the US-based Iron Mountain, storage and information management service provider.
The value of the deal was not disclosed. Besides, it made Rs 150-crore investment in Lotus Surgical in 2013, giving it significant board position and exit rights. Its lone minority deal from second fund is Rs 150-crore investment in Hyderabad-based specialty hospital made in 2014. Samara did not wish to divulge the name of the hospital.
"We have quite a few transactions lined up for the second half of this year, including exits from both fund one and two, besides full deployment of fund two," says Narang. "Once that gets done, 12 months down the line, we will look for fund three," he says.
On exit front, its investee company Thyrocare Technologies got listed last month, which helped it part-sell stake at four times return. The investment was made from its $290-million first fund. Another partial exit from first fund was made when Monte Carlo got listed in late 2014. Samara made 11 investments from its first fund.
Of this, it has made partial exits from five investments.
And, now with the initial public offering of Ratnakar Bank planned next month, it plans to make one more exit.
The PE firm plans to fully exit its fund one in the next six to 24 months. Before that, it plans to make at least one exit from fund-two investments in the next six months and then follow it up with launch of third fund in the next 12 months.