Emblem FII, a fund advised by MCap Fund Advisors Pvt Ltd, an investment advisory firm floated by Subbu Subramaniam, ex-Partner at Baring Private Equity Partners (India) Ltd, has picked up 1 per cent stake in City Union Bank from the open market, at least two people with direct knowledge of the development told VCCircle.

At the current market price, the investment is valued at around Rs 20 crore or $4.5 million. This marks the second investment for the fund, which picked up 1 per cent stake in Jyothy Laboratories Ltd from the open market, with an investment of $5 million in May this year.

Although MCap Fund Advisors has made both its investments in the public markets, it will be largely making growth capital investments in private companies. “It has a flexibility to do about 20-30 per cent public market deals,” said one of the sources.

“Subbu Subramaniam is travelling and will not be able to respond,” said Abhilash Lal, Partner at MCap Fund Advisors, in an e-mail response.

City Union Bank raised $30.50 million in 2007 from a consortium of investors – Life Insurance Corporation of India, Yatish Trading Co Pvt Ltd, Argonaut Ventures LLC, Netherlands Development Finance Co (FMO), Larsen & Toubro Ltd and Blue River Capital.

Kumbakonam-based City Union Bank, one of the oldest private sector banks in the country, reported 32 per cent increase in its net profit to Rs 58.51 crore for the quarter ended June, 2011, as compared to Rs 44.37 crore in the corresponding quarter last year. The bank’s total income has increased 39.30 per cent to Rs 417.02 crore for the quarter, over the year-ago period.

The bank is planning to add 41 branches to its existing 259 branches by March, 2012. However, it will require Rs 3,000 crore by 2014, to support its target of achieving a threefold increase in its business. It is also planning to seek its shareholders’ approval to raise Rs 300 crore through QIP at the upcoming AGM, which will be held later this month.

According to industry sources, MCap-advised funds are on the road to raise $250 million and have achieved a first close of $60 million earlier this year. Investors, who committed capital, include West Asian institutions, pension funds and two non-resident Indian family offices.

Subramaniam’s MCap fund now joins the club of independent fund managers who have branched out from established PE firms to float their own shops. Subramaniam was earlier a Partner at Baring Private Equity Partners (India) Ltd, a Delhi-based private equity firm.

With more than a dozen such independent PE fund managers trying to raise money for their first-time ventures, only a few have been successful.

Among those who have had a successful run at the fundraising ground are Sumir Chadha’s WestBridge Capital Partners, which mopped up $500 million for its debut fund, Ajay Relan’s CX Partners, which had a final close of $515 million, and Renuka Ramnath’s Multiples Equity Advisors raising $375 million from both domestic and international investors. This has only proved that Limited Partners or institutional investors investing into PE funds are reaffirming their faith only in established fund managers with proven track records.

Incidentally, about 120 private equity funds are seeking to raise approximately $34 billion in 2011, according to Preqin, a London-based firm, which tracks fundraising globally.

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