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All The Families With Us Are Potential Limited Partners

15 December, 2009

Wealth management firm Altamount Capital Management, which started operations this year, claims to be the first-of-its-kind entity providing private investment opportunities?to a network of wealthy families.

The firm, which has around Rs750 crore under its supervision, has commitments from Indian families that qualify to be on any billionaire list. Altamount is looking at expanding the assets under management (AUM) to Rs1,000 crore by the end of the fiscal. Its clients include India’s top 50-100 rich business families from sectors such as infrastructure, steel, mining and real estate. In an interview, managing director Murzash Manekshana and investments director Richa Karpe talk about the family office fund’s compensation structure, the investment outlook of India’s rich families and their rise as a limited partner (LP) class, or investors in private equity (PE). Edited excerpts:

What is unique about Altamount Capital Management?

Karpe: We follow an integrated wealth management model and keep the family as the focal point. There is the traditional investment management function of providing advisory services across different asset classes such as fixed income, equities, special situations, distressed (assets) and so on. A lot of our families are facing challenges across succession. We get involved with families in setting up trust structures.

What services do you offer?

Karpe: The firm takes commitments of Rs50 crore and upwards from Indian families. These are entrepreneurial families and a lot of their wealth is attached to their businesses. If they look at unlocking their assets,?we work on the “sell side”, just like an investment bank. We identify the best partner for our families both from a financial?and a strategic perspective.

We also get involved in debt restructuring. We work on the “buy side” like a PE fund, except that we don’t charge like a PE fund until we invest in the company. On the PE side, $5-10 million (Rs23-46 crore) is the sweet spot of deals we look at. We operate like a PE club because we show the investment opportunity to all our families at the same time.

Unlike a PE fund, which has the discretion of investing in the assets, here it solely lies with the family. Families have high risk-taking capacity and are very comfortable in investing in businesses that they understand. We also evaluate PE firms and often advise them (clients) if the direct exposure to a sector makes sense or through a PE fund. We help clients in secondary PE placements too.

What are the investment opportunities for the family clients?

Manekshana: In the recent past and the near future, clearly “sell side” transactions have been more—it could be a structuring,? internal? placement or an outright sale. We also see a lot of restructuring opportunities. People have relooked their business, cost of financing and personal finances. There are families which want to diversify and do not want to put all eggs in one basket. So they’re looking to sell a portion of the businesses to PE players. The sophisticated money has already started buying.

What is your fee structure?

Karpe: The models include transaction-based fee, retainer fee or success-based fee. The fee is confidential. The global standard is about 100 basis points, we are at about half that range. We have just crossed Rs750 crore of assets under supervision, but we will be crossing Rs1,000 crore by the end of this fiscal. We are also talking to three NRI (non-resident Indian) families which are looking to invest substantial sums in India. We are India experts and help Indian families with their global plans and global families with their India plans.

Is there enough liquidity out there?

Manekshana: There is enough money on the sidelines waiting to be invested in these transactions. We will also have a fund of funds (an investment strategy of holding a portfolio of other investment funds rather than investing directly in shares, bonds or other securities). This will invest in other private equity funds. All our families are potential LPs, though it is at a very nascent stage.

What are the deals you are working on?

Manekshana: We are working on a couple of deals. Currently, we are working on a power deal. I cannot disclose the name, but it is a 540MW power plant in Maharashtra. We are again looking at a sell side for a road company. Thirdly, looking at raising a mix of debt and equity for a hospitality company. We are doing a lot of debt restructuring and asset securitization.

Also, we have recently been appointed as an investment adviser for a very large multi-office in London. We will be working as an investment manager for their India assets. Their investment criteria is very high and they look at an opportunity for at least $10 million and above. For them, we are not only evaluating investment opportunities, but also evaluating the most efficient structures through which they should invest in India.

Also, there are two families which have dedicated money set aside for setting up educational institutions. We are actually working with Arcil (Asset Reconstruction Co. India Ltd) on a company—it’s on the verge of going to Arcil. The underlying real estate is huge, so we are doing a strip-down sale and selling the plant, which has got 60,000 tonnes of metal at scrap value. Arcil is one of the stakeholders and is one of the sellers in this case. 

What are your clients’ key concerns?

Manekshana : Clients are sceptical on two fronts – more long term, illiquid commitments and quality of investment managers. They have seen that a credential manager has not been able to do well when there is a systemic issue. It will take time for investor confidence to get back in shape.


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All The Families With Us Are Potential Limited Partners

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