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Tatas giving shape to wide-gambit PE entry

The $29-billion Tata Group is in the process of making a major private equity push through its flagship financial services company, Tata Capital Ltd (TCL). The plans being drawn up relate to setting up PE funds aimed at mid-cap, technology and healthcare sectors.

TCL managing director & CEO Praveen P Kadle told FE: “The plans are currently on the drawing board stage, and we hope to unveil it around September. We are looking at areas like the mid-cap space and technology firms.”

TCL sources said each fund would be to the tune of $200-300 million, and would aim at getting investors also from the non-resident Indian community. The PE plan is part of a broader financial services game plan being put in place by the Tata Group under the Tata Capital umbrella.

“We plan to leverage the strength and contacts we have in several business sectors through our group companies,” said a source.

In the technology segment, IT and communications would be focus areas, where the group has a significant presence. Group company Tata Consultancy Services (TCS) is India’s largest IT company, while Tata Elxsi, Tata Interactive Systems and Tata Technologies also form part of the informations systems group.

Within the communications group are companies like Tata Teleservices, Tata Communications and Tata Sky.

“Many a time, we come across companies, some of them our major suppliers, that would require more funds to scale up technology. Such companies would form part of the focus,” the source added.

As traditional banking sources of funding turn tough for companies–particularly in the mid-cap space–with rising interest rates hitting the cost of borrowing of such companies, PE players are sensing opportunities in such areas as the markets offer valuations which are attractive. Bankers generally believe that PE funding may replace bank finance for projects in such times as such funds seek attractive returns but are not averse to taking on risks.

The Tata Capital plan is to provide what it calls “holistic financial services” ranging from personal loans, car loans, distribution of financial products and broking, wealth management, small and medium enterprise (SME) finance, infrastructure finance, capital markets and PE.

Kadle said though the markets were highly choppy at this point, Tata Capital was rolling out its plans now so that it was prepared for the upside in future.

Distribution and broking will be undertaken by Tata Securities Ltd, a wholly-owned Tata Capital arm, which is also a member on the National and Bombay stock exchanges. TSL, its chief executive officer Avijit Bhattacharya said, would also be targeting the tier-II and tier-III cities where there was still considerable activity despite the volatile market conditions.

Source: Financial Express

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