Birla group to enter PE business
The Aditya Birla group is set to enter the private equity (PE) business in order to provide growth capital for the emerging enterprises in the country.
By Kausik Datta, TNN |
MUMBAI: The Aditya Birla group is set to enter the private equity (PE) business in order to provide growth capital for the emerging enterprises in the country. The first investment is expected to be announced within a fortnight. The entry into the emerging PE space — the country witnessed PE deals worth $19 billion in 2007 — is in line with the group’s plans to consolidate its position in the financial services industry. The group already has presence in mutual fund and insurance businesses through joint ventures with its Canadian partner Sun Life. However, the PE venture will be entirely owned by the Birla group.
Although the exact size of the group’s initial contribution to the PE business could not be ascertained, it is estimated that a sizeable portion of the $1 billion being raised by Aditya Birla Nuvo, the holding firm of the financial services activities, will be injected into it. Later on, the PE venture will raise funds onshore as well as offshore.
“The growth in the PE business is historically faster than that in the mutual fund sector. The group’s mutual fund business has grown to $9 billion in over 10 years. This perhaps indicates the size of the PE business it will have in the future,” said a banker.
Bharat Banka, president & head of corporate finance of the group, will be the CEO of the PE business, in addition to his current responsibilities. Mr Banka has been in-charge of the group’s finance ever since the former CFO Sumant Sinha moved to head the retail business of the group over a year ago. A team of a dozen professionals is being put in place.
This is the third instance of a corporate house getting into the PE business, the first two being Anil Ambani’s Reliance Capital and Kishore Biyani’s Future Capital Holdings (FCH). FCH, the financial services arm of Future Group, has a private equity fund — Indivision — and real estate funds — Kshitij and Horizon — that develop retail-led real estate around the country. It also has a hotels and a logistics division.
India has recently become the hotbed of PE activities, even overtaking China. A recent study estimates that there are nearly 160 VC/PE firms active in India compared with 89 in Brazil, 28 firms in Russia and 115 in China. Another 40 firms are waiting in the pipeline. The PE investment is estimated to go up to around $40 billion by next three years.
Although the exact size of the group’s initial contribution to the PE business could not be ascertained, it is estimated that a sizeable portion of the $1 billion being raised by Aditya Birla Nuvo, the holding firm of the financial services activities, will be injected into it. Later on, the PE venture will raise funds onshore as well as offshore.
“The growth in the PE business is historically faster than that in the mutual fund sector. The group’s mutual fund business has grown to $9 billion in over 10 years. This perhaps indicates the size of the PE business it will have in the future,” said a banker.
Bharat Banka, president & head of corporate finance of the group, will be the CEO of the PE business, in addition to his current responsibilities. Mr Banka has been in-charge of the group’s finance ever since the former CFO Sumant Sinha moved to head the retail business of the group over a year ago. A team of a dozen professionals is being put in place.
This is the third instance of a corporate house getting into the PE business, the first two being Anil Ambani’s Reliance Capital and Kishore Biyani’s Future Capital Holdings (FCH). FCH, the financial services arm of Future Group, has a private equity fund — Indivision — and real estate funds — Kshitij and Horizon — that develop retail-led real estate around the country. It also has a hotels and a logistics division.
India has recently become the hotbed of PE activities, even overtaking China. A recent study estimates that there are nearly 160 VC/PE firms active in India compared with 89 in Brazil, 28 firms in Russia and 115 in China. Another 40 firms are waiting in the pipeline. The PE investment is estimated to go up to around $40 billion by next three years.
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