Chennai-based portfolio management company Unifi Capital has come out with its latest fund, the India Spin-off Fund, dedicated exclusively to investments into corporate spin offs and demergers.
Unifi expects to raise close to Rs 200 crore through the fund and will build a portfolio of 8-12 companies, said K Sarath Reddy, founder and CIO, Unifi Capital. The company has identified 15 cases of demergers under process, out which five have been shortlisted for potential investments.
Demerger processess at companies such as Alembic, Triveni, Texmaco, Dalmia, Century Ply, Jubilant Org, Kirloskar Oil, Harrisons, Grasim, Mid Day, Celebrity, JindalSaw, Asian Hotels, TCI & GATI have been identified by the fund as possible invsestment platforms and out of these it had firmed up plans for Alembic and Triveni.
?We will be raising funds from high networth indviduals, corporates and as well as through our overseas subsidiary based in Mauritius,? he said. The fund will be making investments into parent and the baby entity depending on the structure of the company. While 75% of the investment will go to the parent company, the baby company will get 25% of funds.
Giving details on the research undertaken prior to launching the spin-off fund, G Maran, vice-president, Unifi, said, ?Global studies have shown that spin-off opportunities of listed companies have relatively generated higher returns than the market indices over the medium to long-term. At a time when many professional investors lament that the proliferation of institutional funds and the widespread use of screening techniques, have made it tougher to find bargains in the stock market; spin-offs, as an investment theme, continues to pay off handsomely.
Unifi has researched Indian spin-off firms listed on the stock exchanges and evaluated both their stock performance. The Unifi Spin-Off Fund seeks to exploit the opportunity arising from a combination of factors such as information asymmetry and regulatory complexity. Unifi plans to keep an investment perspective of 18-24 months to provide enough time for the market to price the impact of spin-off, he added.