UTI Ventures, now known as Ascent Capital Advisors, appears to be on its way out of its five-year-old investment in Ambika Cotton Mills Ltd with modest returns. UTI Ventures, that invested Rs 16.2 crore out of its Ascent India Fund in June 2005 and has been holding on to its 14.8% stake in the textile firm, has sold almost two-thirds of its entire holding, earning a return of around 12%.
Ascent India Fund sold around 10% stake at Rs 207 per share against the cost of acquisition of Rs 185 a piece five years ago. The venture capital firm had bought the shares through a preferential allotment in June 2005.
The fund raised was to augment the resources of Ambika Cotton for the implementation of its capacity expansion where it was installing 14,000 spindles in the first phase and putting in another 10,000 spindles in the second phase. This was to help the company to have an
installed capacity of 66,000 spindles, almost two thirds of which was to be for compact spinning.
Ambika Cotton that closed last fiscal with revenues of Rs 208 crore with net profit of Rs 18 crore had early this year approved a proposal to enhance the captive wind power capacity from to 26.6 MW by adding another 11.2 MW to the existing capacity in Tamil Nadu. It had shelved the proposal to put up a captive 6 MW Bio-mass power plant and opted to go ahead with expansion of wind power asset.
The net realisation from the investment is pretty modest for Ascent India Fund that has partly to do with the general slowdown in textile sector that has not allowed valuation to surge ahead even as markets are marginally short of their all time peak. Bulk of the shares of Ambika Cotton that Ascent India Fund sold was bought by IDFC Mutual Fund.
Founded ten years ago by Raja Kumar, a former civil servant who also served as a regional director of market regulator Sebi, Ascent Capital’s portfolio companies include names like Koutons Retail, Shriram EPC, Subex Azure, Zylog, Consolidated Construction and South Indian Bank.