European leader RTL Group and India's Reliance Broadcast sign television JV

A leading European entertainment network (part of Bertelsmann AG) RTL Group has joined hands with Anil Dhirubhai Ambani Group (ADAG) promoted Reliance Broadcast Network Ltd (RBNL) for a joint venture to launch thematic television channels in India.

RBNL (among India’s youngest media conglomerates) through its subsidiaries will form a limited liability company (LLC) with RTL Group and will together act as shareholders with an equal equity interest (50:50) in the joint venture. This development marks RTL’s foray into the Asian TV market and is RBNL's second international partnership after CBS Studios International.

Tarun Katial, CEO, RBNL said the joint venture brings the European leader in to the Indian market and that it will be at the core of creating a revolution in the Indian English entertainment space.

"We are committed to offering audiences unprecedented international television content, and RTL Group’s, extensive library and lineage compliment the partnership perfectly. The synergies, values and visions that both Companies share, will allow this joint venture to offer value to audiences and marketers alike,” said Katial.

The partnership will also give the JV access to RTL Group’s content production arm FremantleMedia’s content.

Refraining from divulging precise financial details, RBNL officials said that the initial scope of investment in the JV will be for two English-speaking thematic TV channels. One will be a reality channel with international content, mainly from RTL Group’s production arm FremantleMedia, and the second one will primarily target male viewers with action-oriented content," said the company spokesperson.

Andreas Rudas, executive vice president - regional operations and business development (Central and Eastern Europe) for RTL Group, said, the company believes strongly in the Indian market. "It's a market with a young population which loves TV and impressive potential for further growth. We are thrilled to be here with Reliance Broadcast for our first broadcasting venture in Asia,” said Rudas.

RTL Group With a market cap $15.5 billion, has a portfolio of 40 television channels and 33 radio stations in 10 countries. With RTL owning Fremantle, it is also one of the world’s leading producers of television content such as talent and game shows, drama, daily soaps and telenovelas, including Idols, Americas Got Talent, The X Factor, Good Times - Bad Times and Family Fortune, The Apprentice.

RBNL brings to the JV significant muscle in sales and marketing along with key understanding of the local market and consumer dynamics. It's strong robust distribution network will also allow for optimising content besides its ability to also leverage the Reliance Group media assets across mobile, online, multiplexes and gaming. As for RTL, it brings in a rich experience in the television broadcasting business, strong depth in content library with high quality formats, production and promotion expertise.

Key financial highlights of RBNL:

Consolidated – accounting period ended March 31, 2011

- Total revenue of Rs. 141 crore

Standalone Key Performance - quarter ended March 31, 2011 vs. quarter ended March 31, 2010

- RBNL recorded revenues of Rs. 71 Cr, up by 30%

- Radio Operations records revenue of Rs. 47 Cr up by 25%

- Radio remains EBITDA positive at Rs. 9 Cr, growth of 176%

- Radio inventory utilisation growth of 20%

- Intellectual Property business revenues grew by a remarkable 240% to Rs. 15 Cr on the back of 8 properties

- OOH business posted a robust 15% growth sales performance driven by innovation and marquee properties

Indian Hotels Co says US operations eating into profits

This story first appeared in DNA Money edition on Wednesday May 25, 2011.

The Indian Hotels Co Ltd (IHCL), the Tata group hospitality company, finally seems to have come in terms with the fact that its US operations are eating up profits generated in the home country.

Anil P Goel, executive director - finance, IHCL, said while there has been a growth in the company’s topline, the management is concerned about some pockets in the overseas operations. “We are very much concerned about our US operations. The business there is still under pressure and is actually denting the overall profitability at the consolidated level,” said Goel without sharing details on the extent of impact on profitability.

IHCL has three hotels in the US — Taj Campton Place in San Francisco, Taj Boston and The Pierre in New York. While the San Francisco and Boston properties are owned by the company, the New York hotel is on a long lease.

Goel said the management is doing everything that needs to be done to turn around the US operations. “It will have to be done in a timebound manner. The idea is to make sure that the high-quality assets being acquired over the last few years start contributing towards the overall profitability,” he said.

In another development, IHCL has decided to increase its stake in one of the associate companies — Piem Hotels Ltd — which owns the Vivanta by Taj President in Mumbai among other properties in the country. The management will invest Rs51 crore to increase its stake to over 50% from the current 42.6% in Piem.The additional stake in Piem will be acquired by IHCL directly or through an investment arm. Post acquisition, Piem will become an IHCL subsidiary.

During the current fiscal, IHCL will add close to 2,143 guestrooms to its portfolio of 12,795 rooms across 107 hotels globally. The additions will be spread across 16 new hotels to be opened between IHCL and its subsidiaries.

For the fiscal 2011, the company expects to make capital expenditure of around `300 crore, of which Rs150 crore has been already committed. IHCL has also retired debt of Rs600 crore in March 2011 and currently has Rs1,700 crore in debt on a standalone basis and Rs3,600 crore on a consolidated basis. Its current debt-to-equity ratio is 0.7:1.

On a standalone basis, for the fourth quarter of the fiscal 2011, the hotel company reported 57% increase in net profit at `93.93 crore from Rs59.91 crore in the same quarter of the previous fiscal. However, on a full-year basis, the company reported a decline in net profit from Rs153.10 crore last year to Rs141.25 crore in fiscal 2011.

Mumbai five-star hotels reeled under pressure in March

This story first appeared in DNA Money edition on Tuesday May 24, 2011.

Five-star hotels operating in the Indian commercial capital – Mumbai – have witnessed pressure on business during March 2011 as compared to the same period last year. A business performance data compiled by CRISIL Research indicated a southward trend in revenue per available room (RevPAR) for hotels in South Mumbai while north Mumbai hotels managed a very marginal increase despite decline in average room rates (ARRs). In fact, Mumbai and Agra were the only hospitality markets among other cities viz. Delhi, Bangalore, Goa, Chennai, Kolkata and Jaipur that experienced decline in ARRs.

“The south Mumbai hospitality market witnessed a decline from last year’s occupancy levels resulting into a downward pressure on ARRs due to competition, which lead to RevPARs declining by 12% on a year-on-year (y-o-y) basis. However, despite an increase in occupancy levels, north Mumbai saw downward pressure on ARRs, which declined by 5% (y-o-y), due to additional inventory and competitive business scenario,” said Ajay Dsouza, head of research, CRISIL Research. The business performance data compiled by CRISIL pertains to five-star and five-star deluxe hotels only.

Occupancy levels in south Mumbai hotels declined from 70% in March 2010 to 65% in March 2011, while the north Mumbai hospitality market witnessed an increase in occupancy from 64% in March 2010 to 68% in March 2011. “Though south Mumbai witnessed a decline in occupancy levels, it is most likely a temporary dip rather than a signal of declining demand,” said Dsouza.

The average room rate in both south and north Mumbai markets was down by 5% from Rs 11,050 to Rs 10,508 in March 2011 and Rs 8,932 in March 2010 to Rs 8,511 in March 2011 respectively. The decline in room rates significantly impacted revenue per available room (RevPAR) for south Mumbai hotels in particular by 12% - down from Rs 7,715 to Rs 6,805 in March 2011.

Despite decrease in ARRs, hotels in north Mumbai saw a marginal increase in RevPAR by 1% from Rs 5,716 in March 2010 to Rs 5,787 March 2011 mainly owing to increased occupancy levels. RevPAR is total room revenues divided by total room inventory of a hotel — irrespective of the number of rooms occupied. It shows how much the whole asset is actually earning.

Officials from Taj and Oberoi groups with very significant hotel room inventory in south were not available for comment. A detailed questionnaire sent to representatives of both the companies remained unanswered at the time of going to print. However, requesting anonymity, a senior official from one of the groups said business has progressed well and hotels did registere growth in the said period though it wasn't very significant.

“The south Mumbai market saw new room supply as Taj's palace wing and The Oberoi got re-introduced at various stages in 2010. While there was initial pressure, new inventory has got absorbed and rooms rates have stabilised. I'd say a decent growth was registered in March 2011 vis-a-vis same period last year,” said the official.

On April and May months till date, the official said that the new fiscal has started on a very positive note. “We see the momentum continuing in the coming months except for the monsoons which traditionally is a lean season. However, meetings / conferences and weddings will make it up to a large extent,” he said.

Echoing the sentiments were hoteliers in north Mumbai. Rajiv Kaul, president of The Leela Palaces, Hotels & Resorts, said, “Occupancies are certainly holding up and we are seeing 10-15% improvement in business on a year-on-year basis. The situation is very much true for all our operational hotels in the country.”

On the outlook going forward, industry experts are of the opinion that hotels in most destinations have managed to arrest the downward trend in ARRs seen over the last couple of years and some destinations have even seen a substantial increase. “Overall most destinations are likely to continue to see improved demand over last year. While there will be a decline in occupany and ARRs in coming months, it will be more due to seasonal reasons (end of the tourist season). Having said that, increasing costs and competition will place pressure on profitability,” Dsouza cautioned.

Additional Reference Points:

- Driven by increase in foreign tourist arrivals (FTAs), leisure destinations such as Jaipur, Goa, and Agra saw sharp increases in RevPARs (between 20-30%), driven largely by an increase in occupancy levels

- Amongst business destinations, Kolkata and Chennai saw sharp improvements in occupancy levels, boosting RevPARs by 27% and 23% respectively

- Delhi saw a sharp increase in occupancy from 72 to 79%, while ARR growth was relatively muted at around 3%. Driven by the increase in occupancy, RevPAR in Delhi increased by 14% on a year-on-year basis

Hotel Leela set to raise Rs 1,000 crore

Hotel Leelaventure Ltd (HLL) will raise to the tune of Rs 1,000 crore. The company board met on Monday (May 23, 2011) to review the progress of equity raising plans. Approval from shareholders will be sought in the coming weeks for this fund raising exercise.

While company officials are tight-lipped, a senior management personnel had earlier stated that the company is looking to raise money by issuing fresh shares of around 14.95% to 'prospective investors' to help cut debt and lower interest costs. In this regard, the company management is believed to have initiated discussion with top global private equity firms operating in India. Industry sources also said that names like Blackstone, KKR, Carlyle and TPG are among the leading PE players being spoken to for the potential capital infusion.

The luxury hotel operator also announced its results for FY'11 wherein its earning before interest, tax, depreciation and amortisation (ebitda) increased by 19% from Rs 153.45 crore last year to Rs 182.63 crore in 2010-11. However, owing to higher interest burden, its consolidated net profit declined 7.84% to Rs 37.84 crores in FY'11 as against Rs 41.02 crore last year. The company's consolidated net sales for the three months period ended March 31, 2011 increased 17.05% at Rs 525.82 crore as against Rs 449.19 crore in the same quarter last fiscal.

Commenting on the performance of the company, CP Krishnan Nair, chairman, Hotel Leelaventure Ltd, said, "With the improved performance of existing hotels and addition of New Delhi hotel, the company's revenue and ebitda is expected to go up by about 45% in the current fiscal."

Vascon forays into industrial and logistics park space with Rs 1,000 crore project

Vascon Engineers Ltd has formed a limited liability company (LLC) to launch its foray into the development of industrial and logistics parks business. The Pune-based BSE-listed engineering, procurement and construction (EPC) company has joined hands with Renaissance Micro Infrastructure & Realty P Ltd for the construction of this project. Spread over 250 acres, the development will come up village Vashere, Bhiwandi extended suburbs of Thane district.

R Vasudevan, managing director, Vascon Engineers Ltd, said, this is the first time we have got into developing a project of this nature through V R LLC. “The model being followed here is based on the high volume and low cost approach. With a total area of 16 million sq. ft. this Rs 1,000 crore project will be completed in the next five years. In terms of realisation, on a Rs 250 crore a year basis, we are expecting a profit after tax (PAT) of 7-8% annually,” he said.

Vasudevan is also of the opinion that this development will pave way for similar opportunities across the country given the dire need of industrial and logistics space in India. “The focus is on adding bandwidth to the portfolio and projects like this have great potential in the company. Besides, this being a low-cost model can very well be replicated in different locations across the country,” he said.

In another development, Vascon has sold its first hospitality project in Goa operating under the banner Vista do Rio. The 41-room apartment hotels was being operated and managed by Vascon. Elucidating the reasons, Vasudevan said, despite being located strategically the property wasn’t operating to its optimum level and hence the decision to sell. “It has been bought out by a Shimla-based hotelier for Rs 15 crore. The sale proceeds will be used to fund our real estate developments in the country.

On the real estate front, Vascon is looking to launch eight residential development projects in this financial year. These projects will add 4 million sq ft to the company’s overall development (total area under construction) of 6.6 million sq. ft. Of the 4msf, around 1.5msf is likely to get completed in this fiscal.

Analysts tracking Vascon are of the opinion that the scheduled launches by the company will keep the real estate activity / momentum on and complement their EPC business. “Considering their outlay for the current fiscal, we feel the company should be able to maintain 20-25% overall growth in the top line,” said Dipesh Sohani, research analyst with MF Global.

However, there are some concerns expressed as well especially on the real estate business. “The real estate sector in general is facing significant challenges. Companies are faltering on execution and projects are getting delayed. This apart increasing interest rates are impacting residential sales significantly. So we’ll have to see how the management is able to deal with these challenges going forward,” said an analyst requesting not to be quoted citing media policy.

Vasudevan however, is confident that their projects will not face execution problems. “Most of our projects are in markets where there is very genuine demand for residential housing. Besides, these units are priced very attractively in the Rs 3,200 to Rs 3,900 bracket. The projects will also be tweaked as per the market response during the development stages thereby minimising any potential impact,” he said.

Yash Birla buys out partner in spa business, plots expansion

This story first appeared in DNA Money edition on Tuesday, May 17, 2011.

The Yash Birla Group (YBG) has acquired another 48% stake in its health and wellness business venture — Birla Kerala Vaidyashala (BKV). The stake was bought from its joint venture partner, Kurup family, which is now left with 1% in the entity while the rest is with YBG.

N Venkat, CEO & MD, Birla Wellness, said that the group wanted full control and run the show itself hence the move to acquire JV partner’s stake. “It is a cashless deal wherein some of the assets in Kerala have been transferred to the joint venture partner in lieu of their 48% stake,” said Venkat.

Set up in 2008, BKV operates around 40 ayurvedic spa centres across key cities in India. A privately held company with an annual turnover of around `10 crore, BKV has largely focused on domestic presence in the last three years. However now that YBG has assumed full control over the business, the management is looking to take the BKV brand overseas and will soon launch ayurvedic medspa centres in UAE, Gulf region, Southeast Asia.

“We will start with our own centre and adopt the management franchise strategy for expanding presence in the international markets. The overseas centres will be established through a mix of standalone outlets as well as those housed in hotels. Our first centre will be launched in UAE within the next seven months,” said Venkat.

While the initial plan will be to have three to four centres, it will set up close to 20 international centres over the next three years. On the domestic front, YBG will expand the healthcare arm through franchise route taking the brand out of the key Indian metros Mumbai, Chennai, Bangalore & Kerala. In all, the management is looking to have 100 centres across India and international markets.

YBG will tie up with interested parties having 800 to 1,000 sq ft of space, which can go up to 4,000 sq ft depending on the demand to set up franchisees. “Assuming that the real estate will be on long-term lease basis, the franchisee partner will have to invest anything between Rs7 lakh and Rs15 lakh for a centre. Each centre should take 18 to 24 months to break even,” said Venkat.

The Rs 3,000 crore YBG has presence in sectors including auto and engineering, textiles and chemicals and, power and electricals, wellness and lifestyle, education and IT. It has nine listed entities.

Hotel Leelaventure board will meet to discuss fundraising

This story first apeared in DNA Money edition on Monday May 16, 2011.

Captain CP Krishnan Nair’s Hotel Leelaventure board is slated to meet next Monday to consider plans to raise funds, as the hotel chain manoeuvres to pare debt and keep at bay its significant stakeholder ITC Ltd.

This meeting is significant in the backdrop of captain Nair’s recent statement that Mukesh Ambani, chairman and managing director of Reliance Industries, will come to his rescue if ever ITC made a hostile takeover bid. He was reacting to a query posed by a media person at the time of the launch of his brand new five star luxury hotel in Chanakyapuri, New Delhi.

Mukesh Ambani is yet to react to this, however, Captain Nair is confident that the old ties he enjoyed with late Dhirubhai Ambani will help.

In a recent interview, Captain Nair has alluded to “two white knights.” Hotel Leelaventure is currently scouting for private equity investors to ensure necessary capital infusion in the company.

In fact, the company senior management in the past had announced their plans to raise money through private equity by way of issuing fresh equity to the tune of 14.5%. With the said exercise, Hotel Leelaventure is likely to raise in excess of Rs 600 crore. The money thus raised will be used largely to retire a portion of debt on the hotel chain’s books, which is about Rs 3,800 crore. The hotel chain has also decided to liquidate some of its non-core assets and use strategic land banks in Bangalore, Hyderabad and Pune for luxury residential projects. This approach, the management feels, will help them raise another Rs 950-odd crore, taking the overall fund raising to over Rs 1,500 crore.

On 19 April, Hotel Leelaventure increased its borrowing limits from Rs 4,000 crore to Rs 5,000 crore.

The promoters are also looking to shore up their stake to 60% from 54.61%. Of the overall promoter holding, approximately 24% (9.2 crore equity shares) has been pledged as of March 31, 2011.

Recently Leela Lace Software Solution, one of the promoter group companies, has mopped up Hotel Leelaventure’s 13.23 lakh equity shares from the open market for Rs 5.5 crore, increasing its stake to 4.72% (addition of 0.34% stake) at an average price of Rs 41.70 per share.

The company has been tightlipped about their fund raising plans. But industry sources said the management is likely to take the qualified institutional placement route for fund infusion.

Delta Corp takes control of distressed Daman Hospitality

An edited version of this story first appeared in DNA Money edition on Saturday May 14, 2011.

Delta Corp has acquired a controlling stake in Daman Hospitality Pvt Ltd (DHPL), which is setting up a five-star deluxe hotel in the Union Territory (UT) of Daman near the west coast in Maharashtra. The BSE-listed company (Delta Corp) paid Rs 50 crore to acquire 51% in DHPL which is an Indian affiliate of New York-listed gaming, entertainment and hospitality company Thunderbird Resorts Inc. The hotel is to be branded and managed by Thunderbird Resorts once operational by 2011 end.

Industry sources said the acquistion is very likely a distress deal considering DHPL has been struggling to get funding for project completion. With considerable portion of the work completely already last year, the hotel was to start receiving guests in September 2010. However, the opening got delayed and what's further intersting is that, the DHPL management had already hired all the manpower required for running the property - most of them have been sitting idle for almost a year now.   

Officials from both Delta and Daman Hospitality were not available for a comment. Queries emailed to Thunderbird official did not elicit a response. In a company notification to the exchange, Delta Corp, said, 'Construction of the hotel is substantially completed and Delta Corp will further infuse Rs 40 crore to complete the project. The Daman hotel will be ready in another six to eight months and will also have a 60,000 sq. ft. casino which will be set up and operated by a subsidiary company. The company believes that hospitality business is synergistic to with its gaming business and hence will continue to in the hospitality sector with a view to maximise the gaming experience'.

Now that Delta Corp has come into picture, the Thunderbird management in its statement said that the hotel construction shall resume immediately and that completion is anticipated in phases with a full opening in late 2011.

Featuring 176 rooms, the hotel boasts of 30,000 sq ft of indoor events and 70,000 sq ft of leisure are including outdoor pools and other entrtainment zones, a spa spread across 5,000 sq ft in addition to 8,000 sq ft of hi-end shopping arcade.

Post acquisition by Delta Corp, Thunderbird and its original Indian partners will own 49% and Thunderbird will continue to operate the hotel with a management contract.

DHPL at the time of inception was an equal joint venture between Thunderbird and its Indian partner K P Group promoted by Ketan Patel, son of former Daman and Diu Congress MP Dahya Patel. Towards end of 2009, Thunderbird was reportedly in discussion with Madison India Real Estate Fund to riase funds for the resort. It couldn't be independently confirmed whether the placement did happen, however an industry source said that the promoters did eventually dilute stake in the venture to raise funds for the construction of the resort.

Pegged as India's largest gaming and hospitality company, Delta Corp, is promoted by Jayadev Mody (husband of corporate lawyer Zia Mody of AZB Partners). Mody with three other entities namely Aryanish Finance and Investment Pvt Ltd (holding equity shares in capacity of trustees for Aarti J Mody Trust), Bayside Property Developers Pvt Ltd (holding equity shares in capacity of trustees for Aditi J Mody Trust) and Delta Real Estate Consultancy Pvt Ltd (holding equity shares in capacity of trustees for Anjali J Mody Trust) hold 44.18% in Delta Corp. Billionaire investor Rakesh Jhunjhunwala with wife Rekha Jhunjhunwala are also stake owners in the company.

Acquisition of DHPL is a strategic to Delta's Gaming and hospitality foray thereby enhancing its presence and move towards a pan-India imprint. Delta had recently acquired The M V Horseshoe Casino from Harrah's Corp Inc (Caesers Palace, Las Vegas) which is expected to arrive in India by end of June 2011. This 70,000 sq ft floating facility will add another 1,500 gaming positions to the group's existing 725 gaming position.

Tata Housing with Arvind Ltd to develope 134 acre integrated township in Ahmedabad

This story first appeared in DNA Money edition on Saturday May 14, 2011.

Tata Housing and Arvind Ltd have entered into a strategic partnership to develop an integrated township project spread over 134 acres near Ahmedabad. The two have floated an equal (50:50) joint venture for this project which will have a built up area of more than 9 million square feet (msf), located on the western outskirts of Ahmedabad. The township will include residential, commercial and retail spaces apart from a hospital, a school and other civic amenities.

Brotin Banerjee, MD & CEO of Tata Housing Development Co Ltd, said, this JV is part of our long-term strategy of establishing presence in the emergent tier I and tier II cities. “This partnership will help us tap onto a very important Gujarat market,” he said without divulging information on the JV company and related financial details.

Elucidating the arrangement with Tata Housing, senior officials from Arvind Ltd said that the land valued at Rs 250 crore has been being transfered to the joint venture company and that the company will receive immediate payments Rs 125 crore being 50% partner in the project. The project, due for completion in 2012, is expected to generate revenue of Rs 2,000 crore.

Jayesh Shah, chief financial officer, Arvind Ltd, said, “We would get around Rs 125 crore from the land sale in the next six to eight months time, within which the land would be transferred. We plan to start construction in three to four months time. The joint venture company is looking at a couple of thousand crore worth of revenues, out of which around Rs 500 crore to Rs 700 crore could come to us."

While media reports stated the township was valued at Rs 1,250 crore, Tata Housing officials said that a market study is still under way hence exact value of the project cannot be arrived at at this stage. On the payments to be made to Arvind, THDC officials said it will be made in various stages after making some adjustments because the JV partner will also be sharing some proportion of the development / construction cost.

According to a Reuters report Arvind Ltd is looking to liquidate Rs 800 to Rs 900 crore worth of land over the next 3 years, including the Rs 250 crore it expects from the JV. “Currently we are focussing on the land bank that can be converted into an earning asset,” Shah said.

In another development, Tata Housing has launched a new residential project in Gurgaon called Primanti. With this premium luxury housing complex the realtor will further expand its presence in Delhi NCR region. Spread across 36 acres, the development will offer 102 villas, 75 executive floors, 89 executive apartments and 828 tower residences.

(Amritha Pillay contributed to this story in DNA Money)

Nine months in hand, Tata Capital mops up 80% of $1 billion funds target

This story first appeared in DNA Money edition on Thursday May 12, 2011.

Tata Capital has announced the first close at $800 million for a family of five private equity funds announced in August last year.Most private equity firms do fund-raising in stages, typically with three or four closures, if the corpus is huge. Beating the trend, however, Tata Capital has raised 80% of its targeted $1 billion corpus — through a growth fund, an opportunities fund, a special situations fund, an innovation fund and a healthcare fund — in just six months of hitting the street and expects to make a final close well within the targeted deadline of December this year.

Praveen P Kadle, MD & CEO, Tata Capital

“The overall timeframe for closing the fund-raising exercise was 18 months and nine months was sort of a half-way point we had internally targeted as the date for first close. It so happened that $800 million was the figure as of March 31, 2011,” Praveen P Kadle, managing director and CEO, Tata Capital Ltd said.

How did the company manage this despite the difficult fund-raising environment? “In retrospect, we can say now that it was a good decision to take the non-conventional route to raising the funds. Because, when we’d started the exercise, the market was already cluttered with a host of existing and new private equity firms which had set out to raise money for their respective funds. Most of these funds went to the traditional US and European investors and if we’d taken the same approach, we’d have been just another fund in the queue,” said Kadle.

Of the overall corpus, the domestic component of $220 million, or 35% of the overall corpus, has been raised from banks and other financial institutions and through promoter equity (around 15%). The balance $580 million, or 65% of the overall corpus, has been raised from investors in Japan, South East Asia, Europe and Asia Pacific. In fact, close to 40% of the foreign component has been raised from six or seven entities in the Japanese market.

On end use of the funds, Kadle said the company will look to invest in a mix of Tata and non-Tata companies. “We are not really being very adventurous by getting into completely unrelated areas. We have chosen the investment profile of companies which are either raw material suppliers or customers or service providers to the Tata Group companies.”

Working within the Tata ecosystem will ensure that a significant proportion of the investment proposals will be proprietary in nature and not from investment bankers. This, according to Kadle, makes the valuation exercise more advantageous, focused and realistic for the company.

On the deployment side, Tata Capital is taking the stage (early, growth, expansion and special situations) and sector agnostic route (barring real estate and infrastructure, for which group company Tata Realty and infrastructure is raising a separate fund). Tata Capital has already made six investments, totaling $150 million, for its family of funds. The funds have gone into companies operating in sectors like engineering (11%), auto parts (12%), IT & ITES (21%), Healthcare (8%) and Consumer (48%).

Over the life of the current funds, the company plans to make 40 investments —- this means it will make around 34 more investments in the next three years or so. Kadle said the company has an advantage over pure-play private equity firms as it invests in group entities or entities related to them and is therefore able to sniff exit options better.

The expected return on equity is around 18-19%, said Kadle. “While I would not like to put a number to return on equity, all I can say at this stage is that early stage investments are very likely to give us much higher returns provided various other parameters are met with at the time of making the investment. While in contractual terms the investment horizon is around 7-8 years, it will be our endeavour to try and give our limited partners an early return of their capital.”