Private equity fund New Silk Route (NSR) has set an internal target to exit atleast five portfolio investments before it hits the road to raise its next fund. According to sources, NSR has already signed binding agreements to exit 9X Media and Reliance Infratel, the tower business arm of Reliance Communications. “Talks with RCom have been going on for a while and an announcement is expected soon,” said a source familiar with the development.
For NSR which began investing in India in 2007, the exits are crucial to its planned fund raising, the process for which could begin later this year.
Back in 2006, when NSR was founded, it was among the most promising first time funds to enter India but its journey since then has been anything but smooth fraught by delayed exits, investment write offs and serious perception crisis following the arrest of one of its most prominent co-founder, former McKinsey global head Rajat Gupta over insider trading charges.
Since 2007, the fund has invested close to $900 million in 16 companies but has managed only one complete exit to date; in financial services firm Destimoney which was sold to Carlyle group for close to $300 million, sources say.
The solitary deal is believed to have generated ample returns for the fund. But over the years NSR has written off close to $47 million of portfolio investment over allegations financial mismanagement, followed by a lengthy legal battle. Allegations of financial impropriety also surfaced in 9X media founded by former Star TV executive Peter Mukerjea, in which NSR was one of the early investors. The business was later restructured by investors as Mukerjea left.
Notwithstanding the rough ride, the fund’s leadership is hopeful about the future. “Our entire focus currently is on returning investor money and only then we will look to raise the new fund,” says Jacob Kurian, a NSR veteran who has been with the fund since its early days. “In the past two years we have created liquidity opportunities in three portfolio companies and we are looking to several investments this year,” Kurian adds. Though Kurian does not specify whether or not investors in the current fund will make good returns on their investments but says, “the exchange rate fluctuations have hurt a lot, we began investing when rupee was 45 against dollar, now its at 68”.
Last year NSR successfully listed three portfolio companies which include, Cafe Coffee Day, VRL Logistics and Ortel Communications. “We have partially exited Ortel and VRL,” Kurian says adding, “Nectar Lifesciences is already a public listed company and we are awaiting a certain milestone to consider an exit”.
Meanwhile, sources maintain that NSR could take a slightly different approach for the next fund. While its first fund has a pure equity mandate, its next can have elements of structured debt. Also, unlike the current fund which was entirely raised in US, the next fund could be partially raised from India.