Axis PE top brass may buy fund, investors oppose move
Friday, 5 February 2010
MUMBAI, Feb 4 (Economic Times): The managers of Axis Private Equity (PE) are looking at buying out the promoter Axis Bank - a move that has left some leading investors in the PE fund outraged.
These investors, including large state-owned banks, argue that they put money in the fund because of the reputation of Axis - the country's third-largest private sector lender, formerly UTI Bank.
They are unsure whether the PE fund will retain its clout if the ownership of the asset management company changes from Axis Bank to a string of professionals.
Significantly, the proposed deal, which is being negotiated, could be the first of its kind in the Indian venture capital and PE space. The fate of the deal, said an insider, hinges on how well Axis Bank handles the fund's investors.
The PE arm of Axis had raised Rs 6.0 billion through its first fund, the Axis Infrastructure Fund, in 2008. Axis Bank has invested Rs 2.3 billion, and is, therefore, the anchor investor in the fund.
Public sector banks, like Canara Bank, Bank of Baroda, Union Bank and Punjab National Bank, and some large corporates have invested in the fund. So far, the fund has invested Rs 4.5 billion in five companies.
Axis Bank MD & CEO Shikha Sharma said discussions were on with key investors to create what she described as an "appropriate structure".
"As part of the strategic review of the bank's medium-term plans, we are evaluating the way forward for the private equity business; more so in the context of the emerging regulatory landscape globally, and in India. We are in conversation with the key investors in the fund to look at appropriate structures going forward," she said.
But some of the investors in the first fund aren't impressed. "We are not happy with the suggestion. The money was invested based on certain factors. If these factors change, then nobody will be happy.
Everyone has a different attitude. If there is a change in management, things could change," said a senior official of a public sector bank that has invested in the fund. The fund has a tenure of ten years and which can be extended by another two years. The fund management and Axis will hold a series of meetings with the investors to find a solution.
A bank insider said the decision was taken when Axis decided to exit the PE business following a strategic review. Global concerns over the PE business may have quickened the decision, said the source.
When contacted, Alok Gupta, MD & CEO, Axis Private Equity, said: "No, we are not tying up with any other investors for the management buyout. The bank stays as the largest investor in the fund and will support the fund.
These investors, including large state-owned banks, argue that they put money in the fund because of the reputation of Axis - the country's third-largest private sector lender, formerly UTI Bank.
They are unsure whether the PE fund will retain its clout if the ownership of the asset management company changes from Axis Bank to a string of professionals.
Significantly, the proposed deal, which is being negotiated, could be the first of its kind in the Indian venture capital and PE space. The fate of the deal, said an insider, hinges on how well Axis Bank handles the fund's investors.
The PE arm of Axis had raised Rs 6.0 billion through its first fund, the Axis Infrastructure Fund, in 2008. Axis Bank has invested Rs 2.3 billion, and is, therefore, the anchor investor in the fund.
Public sector banks, like Canara Bank, Bank of Baroda, Union Bank and Punjab National Bank, and some large corporates have invested in the fund. So far, the fund has invested Rs 4.5 billion in five companies.
Axis Bank MD & CEO Shikha Sharma said discussions were on with key investors to create what she described as an "appropriate structure".
"As part of the strategic review of the bank's medium-term plans, we are evaluating the way forward for the private equity business; more so in the context of the emerging regulatory landscape globally, and in India. We are in conversation with the key investors in the fund to look at appropriate structures going forward," she said.
But some of the investors in the first fund aren't impressed. "We are not happy with the suggestion. The money was invested based on certain factors. If these factors change, then nobody will be happy.
Everyone has a different attitude. If there is a change in management, things could change," said a senior official of a public sector bank that has invested in the fund. The fund has a tenure of ten years and which can be extended by another two years. The fund management and Axis will hold a series of meetings with the investors to find a solution.
A bank insider said the decision was taken when Axis decided to exit the PE business following a strategic review. Global concerns over the PE business may have quickened the decision, said the source.
When contacted, Alok Gupta, MD & CEO, Axis Private Equity, said: "No, we are not tying up with any other investors for the management buyout. The bank stays as the largest investor in the fund and will support the fund.