Global recession has claimed a victim in India. KSK Emerging India Energy Fund (KEF), a £100 million fund listed in London's Alternative Investment Market, has been wound up after the shareholders passed a resolution last week demanding the same.
The shareholders - which include large hedge funds - passed a resolution on January 22 asking for the liquidation of the company and the return of funds invested by them. The delisting of the company and liquidation has come into effect from January 23. The EGM was held in Guernsey, one of the Channel Islands.
KEF has not made any investment from this fund yet. In September 2008, it had, however, applied to India's Foreign Investment Promotion Board seeking approval for picking up a 49% equity stake in Athena Infraprojects for Rs 220 crore ($50 million). Athena Infra is backed by a group of entrepreneurs including N Prasad formerly of Matrix Pharma. But this deal has not been consummated.
It's not clear why the shareholders have resolved to liquidate the funds and return of funds. A company announcement to the AIM says the demand has come in the wake of a global recession and also caused by some of the internal problems faced by shareholders (read hedge funds).
The proposals for liquidation of the fund was originally put forward on December 9, 2008. The promoters of the fund, however, tried their best to stop the liquidation. In a communication to the board on January 14, KSK Asset Management Services Pvt Ltd, the investment manager to the fund, said that it would claim not less than £10 million as compensation for terminating the agreement. The company would also have to bear the liquidation expenses and only the remaining amount be returned to the shareholders.
However, on January 22, the extraordinary general meeting of KEF passed the resolution to liquidate. The resolution also demanded the cancellation of the company's admission to trading of the shares on AIM and on Channel Island Stock Exchange (CISX) and the company’s CISX listing.
KSK Emerging India Energy Fund, promoted by Hyderabad based power project development company KSK Energy Group, was listed in London's AIM in June last year. The fund had raised £100 million or about $200 million, in one of the largest AIM floats in 2008. The group also has another entity KSK Power Ventur Plc listed in AIM, which raised about £35 million in 2006 from IPO proceedings. This company undertakes power project development in India. KSK Emerging India Energy Fund was managed and advised by subsidiaries of KSK Power Ventur Plc.
KSK operates in India through its fully owned subsidiary, KSK Energy Ventures Ltd (KSKEVL), which got listed in India stock exchanges in June last year. An affiliate of Lehman Brothers of the US has 33.5% stake in KSKEVL. It's not clear who holds this stake after Lehman went bankrupt.
The largest individual promoters in KSK are S. Kishore and Mr. K.A. Sastry. They started the company in 2001.
Hedge Fund Activism On AIM
The KSK episode comes close on the heels of some large hedge fund shareholders demanding the removal of two directors of the AIM-listed company The Indian Film Company.
Asian hedge fund Altima India Master Fund had demanded the removal of Raghav Bahl and Alok Verma as directors of IFC. The company is promoted by Television 18 chairman and managing director Raghav Bahl who holds 21.64% and is the single largest shareholder of the company. Altima, who holds 14.39% in IFC, has demanded appointment of Aashish Vyas and Atul Setia in their place, IFC said in a filing earlier.
IFC has called for a extra-ordinary general meeting (EGM) on February 5, 2009, where the shareholders will vote on the issue. Altima, which has formed a group of shareholders called IFC Requisition Group (IFCRG), has said in a statement that it has about 32% of shareholders to vote in favour of its resolution.