AIM-listed and India-focused private equity firm Elephant Capital, which faced a tough year in 2010, has decided not to make any fresh investment in companies other than re-investments in existing portfolio companies and returning cash to shareholders.
Although Elephant Capital made no investments in the six-month period ended February 28, 2011, it has been active over the last three months. It has just announced a £2.5 million investment in Air Works India (Engineering) Pvt Ltd, a follow-on investment of £0.9 million in Amar Chitra Katha Pvt Ltd and participated in the EIH rights issue, receiving its full entitlement of shares for a consideration of £1.7 million.
With the latest addition of Air Works to its portfolio, the PE firm has invested over 90 per cent of its funds.
Elephant Capital chairman Pramath Raj Sinha said in a statement, “The period under review (September, 2010-February, 2011) has been extremely challenging for Elephant Capital.” He also noted the earlier disclosure where the board wrote down the value of one of its investments and anticipated the write-down of a second which had materialised.
“Clearly, this is disappointing. However, the board believes that there are some sound investments within the portfolio and in particular, was pleased to announce Elephant Capital’s investment in Air Works earlier this month. The fund is now over 90 per cent invested, and in view of this, the board believes that a change in strategy would be appropriate. Elephant Capital will not be investing in new companies going forward and the board will, instead, focus on returning capital to shareholders,” he said in a public statement.
Elephant Capital has also announced a tender offer of £5 million. It will fund the tender offer out of the company’s existing cash resources and the realisation of listed investments, if necessary. In the process, shareholders are invited to tender any or all of their shares for purchase by the company at any tender price, subject to a minimum of 2 pence per share and a maximum of 35 pence per share.
The firm, which has earlier announced plans to exit Global Cricket Ventures, says that it is currently in discussions for an exit of its entire shareholding.
The board has also taken the decision to write down the value of its investment in ClinTec. The company’s forecasts were adjusted downwards, as pipeline projects were slower to come on stream than anticipated and contracts were delayed or cancelled. Elephant Capital had earlier indicated a write-down of £2.1 million, but the final figure will now be £ 2.5 million.
Another portfolio firm Obopay saw a change of guards early this year. But Obopay’s performance last year was disappointing and the coming period will be critical for Elephant Capital’s investment.
Among its other investments, Mahindra Forgings, Nitco Ltd and EIH suffered from the pullback in the Indian stock market valuations.
As of February 28, 2011, the value of its portfolio of seven companies stood at £20.33 million, against the investment cost of £29.97 million.