Arpwood Capital buys 21% stake in Senvion for Rs 716 crore

MUMBAI: Arpwood Capital, the private equity fund launched by ace investment banker Rajeev Gupta with his former colleague Amol Jain, has purchased 21% stake in German wind turbine maker Senvion (formerly RE Power) for $112 million (about Rs 716 crore). “The purchase is part of our fund’s strategy of owning controlling stake in mid-market companies through a leveraged buyout,” said Rajeev Gupta, managing director at Arpwood Capital. “We will pursue to have similar transactions in mid-market companies in India.”

A leveraged buyout, or LBO, refers to acquisition of a company using a significant amount of borrowed money (bonds or loans) to meet cost of acquisition. Often, assets of the company being acquired are used as collateral for loans in addition to assets of the acquiring company. The purpose of leveraged buyouts is to allow firms to make large acquisitions without having to commit a lot of capital.

Unlike PE funds that typically pool resources from investors or limited partners in industry parlance and invest in companies, Arpwood will identify companies to invest and then raise the money from investors. Some PE experts say Gupta is proving to overseas investors in private equity funds about the emerging buyout market in India. “The model of identifying acquisition target and then raising money from investors cannot be run forever,” said a PE consultant. “After proving to investors with two to three deals about the Indian buyout market, the PE fund can approach investors for a larger fund with a proven track record.”