Gaurav Burman quits as director of Elephant Capital; investment manager not to get any carried interest

Gaurav Burman has stepped down as a director on the board of India-focused private equity firm Elephant Capital plc with effect from February 26, 2014 though he remains part of the investment manager of the PE firm.

Burman, a member of the family that owns Dabur India, had co-founded Elephant Capital as Promethean India Plc. In its annual report, Elephant Capital said that Burman has "retired from the board on February 26, 2014, as part of a cost-reduction exercise". Burman, however, will be with the fund through his role as a part of Elephant Capital LLP, the investment manager of the PE firm.

Elephant Capital raised £50 million in early 2007 through a public float at the AIM market in London. It had previously invested in little over half a dozen firms in India and exited a few of them. 

In August, 2010, Elephant Capital exited public-listed IT education firm NIIT Ltd with an IRR of over 23 per cent. In January 2013, the firm exited from its two-and-a-half-year-old investment in clinical research firm ClinTec International at over 60 per cent loss. In 2012 it also exited its investment in EIH Ltd, which owns and manages Oberoi Hotels, at a loss.

Late last year it part exited its six-year-old investment in Mahindra Forgings Ltd by participating in a tender offer by Spanish auto parts supplier CIE Automotive, which is picking a stake in the components business of Mahindras as part of a global deal. The PE firm sold almost two-thirds of its stake again at a loss.

The firm said in 2011 that it would not make any fresh investments and return money to shareholders.

Investment management terms 

Meanwhile, the existing investment management agreement has also been tweaked. The previous agreement entitled Elephant Capita LLP to get a fee equivalent to 2 per cent of net asset value (NAV). This would amount to £0.16 million per annum based on the NAV of £8.1 million at August 31, 2013. 

The board of Elephant Capital said that a fee based on NAV introduces a disincentive for the investment manager to procure an early return of capital and so this has been replaced with a fixed fee arrangement for the 12 months ending February 25 in 2015, 2016 and 2017 at £0.16 million per annum. 

The fixed fee will remain payable in full if the portfolio is realised before February 25, 2017. The investment manager has agreed to continue its management services for no fee if the investment portfolio has not been realised by then. 

In addition, the investment manager’s entitlement to receive carried interests in investments has been terminated. 

This doesn’t mean any major change as the firm’s remaining portfolio firms are sitting on huge losses and may not have brought any perceptible profit to provide a carry to the investment manager.

As of August 31, 2013, the end of the last financial year for the PE firm, all of the remaining six portfolio firms are valued below the cost of investment with its investment in Obopay being written off completely. 

The firm also counts among its investments Air Works India (Engineering), Amar Chitra Katha, Global Cricket Ventures, Mahindra CIE Automotive and Nitco.

(Edited by Joby Puthuparampil Johnson)

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