StanChart Veteran Advising Milestone Promoters On Possible Sale/Merger

20 October, 2011

Milestone Capital Advisors Ltd, a home-grown alternate asset management firm managing assets nearing $1 billion, has received interest from a wide variety of players for a merger or a buyout, one of the company directors told VCCircle.

This comes two months after the financial services company lost its young founder and chief executive Ved Prakash Arya in a freak accident.

According to sources briefed in the market, Standard Chartered has been appointed as a banker for any stake sale, divestiture of holdings, merger/partnership or any such talks. If a deal materialises, it will be the biggest transaction in the Indian PE industry.

While there has been no such deliberation at the board level, directors at an individual level have been pursued by a lot of interested parties, Arvind Bansal, one of the directors at Milestone Capital told VCCircle.

“We have received interest from a wide variety of players including global multi-billion-dollar private equity funds, big corporate houses who want to get into private equity business,  real estate developers who want to partner strategically, as well as other asset management firms,” he said.

Bansal, who is an independent director on the board, said that no investment bank, including Standard Chartered, has been appointed for the deal but confirmed that Prahlad Shantigram, global M&A head at Standard Chartered Bank, is advising the Arya family in his personal capacity. According to him, Shantigram and the Arya family share a long relationship going back to their student life in IIM Ahmedabad.

Shantigram is one of the top deal-makers in the country and has advised in some marquee transactions such as Bharti Airtel-Zain Africa and Vedanta-Cairn. His team was also involved in the GTL-Reliance Infratel deal that later came unstuck and toiled hard to sew MTN-Bharti Airtel deal that didn’t materialise.

In an e-mail response, a spokesperson for Standard Chartered declined to comment on the development.

Bansal said that the immediate focus has been to convey the message that it is business as usual. Post Arya’s death, the investment firm has been able to raise a domestic real estate fund of Rs 400 crore and has exited Resonance Eduventures (a test preparatory company) in a secondary transaction and is in the process of exiting from ratings company CARE (via an IPO).

A consolidation move with another asset management firm will ensure continuity of operations and may also prevent the flight of capital from the limited partners (LP). Also, LPs are quite likely to welcome such a move, as long as they have the confidence that the acquirer has the depth and the experience to smoothly absorb and integrate the people and operations of such a fund.

Milestone is primarily into two businesses – private equity and real estate investments – and has joint ventures for both these practice areas. It has 40 per cent stake in a joint venture with India’s biggest domestic PE firm IL&FS Investment Managers Ltd for two real estate funds and a separate JV with financial services group Religare for private equity. Incidentally, it has invested in more than a dozen companies across real estate and private equity.

Independently, Milestone also runs two domestic schemes, MDS-I and MDS-II, with a committed corpus of Rs 230 crore and Rs 510 crore, respectively.

Although Milestone Capital has an established real estate franchise, it is mostly focused on healthcare and education within the private equity space.

With the JV partners having a significant knowledge of business dealings, possibilities emerge that they may buy out the corpus and the team, and fully manage the funds.

Both Religare and IL&FS Investment are sitting on capital and have been fairly aggressive about acquiring firms in the asset management space. Last year, IL&FS Investment had acquired Saffron Asset Advisors (it added $400 million in assets under management) to emerge as the largest domestic PE firm while Religare entered the domestic mutual fund business by acquiring Lotus Mutual Fund business. It had also acquired the international private equity firm Northgate Capital.

According to Bansal, any buyer name will be more like a conjecture at this point. Those in the know say that there is a huge interest from corporate houses and even from mutual funds. The names which are doing the rounds are those of Religare, IL&FS Investment Managers, L&T Finance, Piramals and mutual funds like Birla Sunlife. “Typically, such acquisitions happen at about 5-8 per cent of assets under management,” said a source.

“We have built a strong franchise with a huge domestic HNI capital base; so we are not really a private equity fund in the classical sense. We have an NBFC, a full-fledged real estate arm and a private equity practice. We also have a team that has stuck together since the beginning and we are focusing on investments and exits as per our pre-decided calendar,” he said.

However, key decision-making at Milestone now rests with Rubi Arya, the wife of late Ved Prakash Arya. Following the untimely death of Ved Prakash on August 25, 2011, the board of directors at Milestone Capital inducted his wife Rubi and brother Ashwein on the board last month.

Although Rubi Arya has not been involved in the business and has no fund management experience, she got in by virtue of the promoter group’s holding of 87 per cent stake in Milestone Capital, largely through privately held firms, as per the DRHP filed last year. She is currently looking after HR operations at Kingfisher Airlines and had recently joined the 11-member board as the promoter director.

Other directors on the board are Nawshir Dara Khurody (former MD of Voltas), Amit Dalal (executive director, Tata Investment Corp), Raj Narayan Bharadwaj (former CMD of LIC), Bhagyam Ramani (executive director, GIC), V K Chopra (former CMD of Corporation Bank and SIDBI), Ashish Joshi (whole time director & Managing Partner – Real Estate, Milestone Capital), Paritosh Kakkad (whole time director, CFO, Head of Risk Management, Milestone Capital), besides two independent directors – Pravin Shah and Arvind Bansal.

 


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StanChart Veteran Advising Milestone Promoters On Possible Sale/Merger

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