The sale of Axis Private Equity Ltd, the private equity (PE) arm of Axis Bank Ltd, India’s third largest private bank by assets, has stalled even though bids were received from PE firms in June this year, three people familiar with the development said.
The investors in the fund, known as limited partners (LPs), are unhappy with the sale and any decision cannot be executed without their consent, the three people added.
The LPs in the fund include state-owned banks such as Corporation Bank, Canara Bank, Bank of Baroda, Union Bank of India, United Bank of India, and Punjab National Bank.
Meanwhile, Axis Private Equity has stopped raising funds from international LPs.
It has also stopped making new investments. A senior official of a public sector bank, who is an investor in the fund, said “We are in internal discussion stage and the case is stuck now.”
In 2008, Axis Private Equity had raised Rs.600 crore for its infrastructure fund.
“No banks are happy. It’s a commitment they (Axis) have made…We have put in our money seeing Axis…Our decision would have been different if it were some other entity,” the public sector banker said, asking not to be identified.
A board member of Axis Bank, who too declined to be identified as he is not authorized to speak to the media in this matter, said “It is status quo. There is no progress on the sale.”
Shikha Sharma, managing director and chief executive of the bank, announced the decision to exit the PE business earlier this year, saying private equity was not one of their strategic business areas.
In February, the PE business had attempted a management buyout by the fund managers, which failed.
In May, the bank received bids from firms such as IL&FS Investment Managers Ltd, Shapoorji Pallonji Group, Darby Private Equity, Edelweiss Capital Ltd and Lanco Group.
According to yet another person familiar with the development, the PE fund, which was raising funds from foreign LPs, shelved its plan midway.
“It is clear that they are not going to draw down and deploy any more money,” the person, a PE fund manager, said on condition of anonymity. If the sale doesn’t go through, the only option left for the PE fund is to exit the investments made, return the money to the LPs, and wind down the fund, he said.
The last investment made by the fund was Rs.54 crore in Shalivahana Green Energy Ltd in July 2009. Its other investments include Rs.60 crore in Vishwa Infrastructures and Services Pvt. Ltd, Rs.126 crore in Harish Chandra (India) Ltd, Rs.75 crore in Neesa Leisure Ltd and Rs.67 crore in Corrtech International Pvt. Ltd.
In response to an email questionnaire sent to Axis Bank last week, the bank’s spokesperson said “We have in the past clearly stated our intent to exit private equity business as it is not core to the strategic interests of the bank. In pursuance of this, we have been in discussions with all stake holders on various options and we are hopeful that we will be able to work out a solution that is generally acceptable.”
“As regards the PE itself, it has built a good portfolio of investments over the last few years and specific decisions about investments and disinvestments are taken independently by Axis PE’s investment committee.”
According to Vikram Utamsingh, executive director and director, private equity, at audit and consulting firm KPMG India Pvt. Ltd, globally many financial institutions such as Citigroup Inc. and HSBC Holdings Plc are exiting the private equity business as it does not fit their core strategy and also because they are in need of liquidity.
“However, in India there are several corporate backed or institution backed PE funds which have received funding on the basis of the brand name backing the fund,” he said.
Source: Livemint