Trikona Trinity Capital PLC, the AIM-listed real estate fund focused on India, is facing a claim of €116 million ($168 million), from a large German investor. Legal battles between a fund and its investors are rare in the private equity world, and the latest development stems from the internal turmoil brewing at Trikona Trinity for a while now.
Trinity, the fund, which has been a prolific investor through 2006-08, has informed the London Stock Exchange that it has received a letter claiming the same from funds sponsored by Germany's SachsenFonds Holdings GmbH, which makes both fund of fund investments and direct private equity investments. Besides Trikona Trinity, claims have also been made against Trikona Advisors, which managed the fund's investment activities in India.
Trikona Trinity has said, in its filing, that it plans to resist these claims and seek further detail and information from Immobilien I and Immobilien II, the SachsenFonds entities which have made the claim. An e-mail sent to Trikona Trinity Capital PLC elicited no response at the time of filing this story.
Trikona Advisors Ltd (TAL) managed the investment activities of the fund in India but now this once-prolific investment portfolio manager faces an irate German investor who has leveled serious allegations of it benefitting from transactions. Besides Trikona Trinity Plc and TAL, the claims are also made against Trinity Capital Mauritius Ltd (a wholly owned subsidiary of Trikona Trinity), TSF Advisers Mauritius Ltd, Mr Aashish Kalra and Mr Rakshitt Chugh. Kalra and Chugh were at the helm of TAL, driving Trikona Trinity Plc's investments in India.
“TAL, Mr Chugh and Mr Kalra - who were, along with the Company, recipients of the Notification of Claim - all deny that they have breached any legal duty owed to Immobilien I, Immobilien II or the Company," said Trikona Advisors in response to a mail sent by VCCircle.
The claims made for an aggregate sum of euro 116 million include SachsenFond's original investment, plus interests and other costs. The missive from the German LP comes after Trikona Trinity terminated the portfolio management agreement with TAL. Trikona Trinity did not give any specific reasons but cited breaches in the terms of the Portfolio Management Agreement as the reason for termination. "TAL denies all allegations against it, and will defend any claims vigorously," the company added in its statement to VCCircle.
Trikona Trinity had entered into a number of transactions with SachsenFonds to divest its stake in various portfolio companies. Trikona Advisers, which is controlled by Mr Kalra and Mr Chugh, also had a joint venture with SachsenFonds called TSF Advisers Mauritius Limited to make co-investments in India.
SachsenFonds has also made serious allegations against Mr Kalra, Mr Chugh and Trikona Advisers in connection with the deals and their subsequent behaviour in relation to the Mauritian TC companies and the Indian companies. The claim alleges that Trikona Trinity and its subsidiary Trinity Capital Mauritius failed to supervise and prevent the activities of Mr Kalra, Mr Chugh and Trikona Advisers and colluded with them to benefit from completion of the transactions.
Trikona Trinity, which has invested around £230 million in India till date, has also recently appointed Arvind Pahwa, formerly the head of Indian Real Estate for JP Morgan Asset Management as a non-executive director. Last month, Trikona Trinity said, it was looking at other private equity fund managers to take over the running and operations of its existing portfolio assets. This came after it terminated the Portfolio Management Agreement (PMA) with Trikona Advisers, which defended itself saying that it created returns of approximately £86 million with an internal rate of return (IRR) of 97%. These returns were primarily generated through sales made to SachsenFonds.
The firm also exited Phoenix Mills in November last year. One of its portfolio companies, Pipavav Shipyard Ltd, has gone public and two others, IL&FS Transportation Networks and DB Realty, are preparing for an IPO. Trikona Trinity reported an increase in net asset value (NAV) of 8% from £1.13 to £1.21 per share for the six-month period ending September 30, 2009. Trikona Trinity, which listed on AIM in 2006, saw the value of its portfolio of investments increase by 6% to £249.7 million ($407 million).