IL&FS Investment Managers Limited (IIML) reported strong revenue growth boosted by numbers from the acquired business of Saffron Advisors but amortisation related to the amalgamation of the entities kept its net profit flat for the quarter ended December’10 over the year ago period.

The listed private equity firm, with assets under management of $3.2 billion, reported 36% increase in consolidated revenues to Rs 57.87 crore with marginal rise in net profit to Rs 16.4 crore compared to Rs 16.22 crore for Q3 FY10.

The company said, “The impact of the growth in AUM is reflected in the enhanced revenue numbers for the quarter.  However, the same is yet to translate into a growth in profits primarily due to amortisation of the consideration paid for the amalgamation.” It pegged the amortisation value for the quarter at Rs 5.54 crore. IIML statement also said the firm saw seven portfolio exits during the quarter, but did not go into details on the specific portfolio exits.

IIML scrip rose 3.85% to close at Rs 33.75 at BSE in a strong Mumbai market on Friday. At this price the company was valued at Rs 689 crore or about 4.7% of the AUM.

Archana Hingorani, Chief Executive Officer, IL&FS Investment Managers, said the performance during the quarter was as per plan: “The Saffron merger was completed during the quarter. This is an important milestone in the company’s ongoing strategy to enhance and diversify its asset base and investors. The integration process is underway and we expect in the coming months this merger will provide significant synergies. Our endeavour would be to use this combined larger platform to raise additional funds with a quicker turnaround time.”

She said, IIML commenced road shows for two of its funds during this quarter and the initial feedback both from existing and new investors has been encouraging. “Though the capital markets have been negative since the beginning of CY 2011 we expect to see growth opportunities linked to continued growth in the GDP. Our focus during this quarter would be continue to augment the funds under our management, closely monitor our portfolio, ensure value protection of our portfolio and also strengthen our risk and control frameworks”

IIML had last August acquired the Mumbai-based private equity real estate firm Saffron Assets Advisors Pvt. Ltd, that brought an additional $400 million assets under IIML, making it the largest PE fund management firms in India with assets like infrastructure and growth capital, besides real estate. The deal would also bring two funds - Euronext-listed Yatra Capital Ltd and Saffron India Real Estate Fund I, which had an anchor investment of $75 million from UK's Standard Life, under IIML.

IIML already has two real estate funds - $525 million IL&FS India Realty Fund I and $895 million IL&FS India Realty Fund II. It also has domestic real estate funds in JV with Milestone Capital and it also recently closed a $658 million infrastructure fund in JV with Standard Chartered. It is also investing from $225 million growth capital fund called Tara India Fund III. Tara India Fund IV plans to start fundraising by end of this year, targeting $300-4000 million fund.

This was one of the first instances of consolidation in the domestic PE industry. In the past, overseas PE firms had acquired local fund management companies including US-based Accel's acquisition of early stage VC firm Erasmic in 2008 and the 2006 acquisition by Sequoia Capital of Westbridge Capital Partners.

Some of the representative transactions of IIML include Shoppers Stop, Gujarat Pipavav Port, IBN18 Broadcast, Godrej Beverage & Foods, Spicejet, ABG Shipyard, Tejas Networks, Bharat Serums & Vaccines, Indiagames, DQ Entertainment, Ramky Infrastructure, Den Networks, DB Realty, Electrosteel Integrated, Orbit Highcity and QVC Realty.

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