Hsbc Equity Plans $120m Fund

HSBC Private Equity Management Mauritius Ltd is planning to float a $120-million India fund after partial deployment of its earlier $60 million fund.

According to Jonathon Bond, chief representative , India, HSBC Private Equity Management, the $120-million private equity fund will be floated next year. The last fund closed in June 1996 and 50 per cent of it is planned to be invested by September 1997.

With the sluggish equity market in India, there is a strong interest in private equity funds, that pick up unlisted equities both for fresh ventures and as expansion capital. These investments, which are quintessential foreign direct investment (FDI), are generally small in size but long-term in nature. The private equity investor usually divests his holdings only a few years after the initial public offering and returns are in the range of 30 to 40 per cent.

 

Unfortunately, unlike China which has private equity funds worth more than $5 billion, Indias share is just around $500 million, Bond said. Some of the leading private equity funds are managed by Jardine Fleming, Infrastructure Leasing and Financial Services, Barings and Indus Venture. The $60-million HSBC Private India Fund (HPEIF) has already invested in three companies and proposes to invest in three more.

In March 1997, it invested $7 million in Shree Rama Multi Tech Ltd (SRMI) through ordinary shares and unsecured fully convertible bonds. The investment will result in the fund owning 18 per cent of SRMl equity. The company is an integrated manufacturer of plastic tubes, laminates and labels used in the dental cosmetics and food industries.

Besides, HSBC Private India Fund has invested $2.2 million in MAC-CWT Distriparks Ltd (MDT) and $4.2 million in Carborundum Universal Ltd (CUL).

HPEIFs investment in MDT in April 97 was to the tune of 40 per cent of the equity.

MDT is a joint venture between CWT Distribution Ltd of Singapore (an associate of Port of Singapore Authority) and ACT India Ltd ( a company of the MAC group).

HPEIF owns 7.8 per cent of CUL equity, which is a quoted company and part of the Murugappa group. The group manufacturers and distributes abrasives, refractories and industrial ceramics.

HPEIF will soon invest $6 million in an auto parts company, $8 million in a chemical group and $4 million in a fast moving consumer good (FMCG) company.