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New Silk Route may acquire Dawnay Day's 50% stake in India Venture

Beleaguered UK investment group Dawnay Day's stakes in its Indian businesses are on the verge of being sold. Five to six potential buyers have shown interest in the UK firm's stake in financial services, hotels and real estate ventures here. New Silk Route, the fund promoted by ex-McKinsey chairman Rajat Gupta, is said to be ahead in the race for acquiring the UK firm's 50% stake in financial services joint venture – Dawnay Day AV India.

Dawnay Day AV India is a joint venture between Alok Vajpeyi, ex-DSP Merrill Lynch official, and Dawnay Day International, the financial services arm of the UK-based Dawnay Day Group.

Mr Vajpeyi holds 25% stake and the remaining 25% stake is held in a trust for the management.

Other than the financial services subsidiary, Dawnay Day has two other subsidiaries in India – Dawnay Day Hotels India and Dawnay Day India Land, a real estate development firm. In both these ventures, Dawnay Day has a significant stake, with a part of the stake held by the management. Mr Vajpeyi also has a small stake in the hotel venture, said a company official.

The UK firm fell victim to post sub-prime credit crunch following which an administrator, BDO Stoy Hayward, was appointed. The administrator is now disposing the firm's assets including those in India. Sources close to the development said that there are five-six parties who have shown interest in the deal. These include some private equity funds and also Indian companies. Though some have shown interest in all the three business, there are bidders interested in just one business also.

“The management of the financial services arm has the right to choose its partners. The process is complex as it is a cross-border transaction and also regulatory approval needs to be received,” said a source close to the company. However, New Silk Route is apparently interested in the financial services arm. Sources close to the development said that the deal size is likely to be in the range of $20 million-$25 million (between Rs 85 crore and Rs 106 crore). The other two arms are, however, likely to be valued much higher. Both Dawnay Day officials in India and New Silk Route officials refused to comment.

Dawnay Day had invested over Rs 100 crore in the financial services firm. It's also said to have significantly invested in both the other businesses. The hotel arm has three properties in Jaipur, Ahmedabad and Pune. The Jaipur property is likely to be ready by the end of the year, while Ahmedabad property will be ready by the end of next year. The Pune property is likely to be ready by the end of 2010.

Dawnay Day AV is into broking, wealth management, portfolio management services and also distribution of mutual fund and insurance products. It currently has 42 branches in seven cities and employs around 1,600 people. One of the other founders of New Silk Route is Parag Saxena, a well-known private equity investor in the US. The fund, which currently has a corpus of around $1.5 billion, is said to have already invested $200-300 million, a bulk of which is in India.

Source: Economic Times

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