Chennai-headquartered TVS Shriram Growth Fund, a private equity fund managed by TVS Capital, has also picked up a stake in Kolhapur-based Ratnakar Bank as part of the PE consortium that has invested in the regional bank, a senior official at the investment management firm told VCCircle.

As disclosed in media reports, the mid-market regional bank recently raised Rs 720 crore from India's largest mortgage lender HDFC Ltd and a consortium of private equity investors including Norwest Venture Partners, Beacon India Private Equity Fund, Cartica Capital, Faering Capital, Gaja Capital Partners and Samara Capital, among others.

Explaining the rationale behind the investment, Gopal Srinivasan, Chairman & Managing Director, TVS Capital, told VCCircle that the mid-sized bank's regional orientation, a strong management team and a thrust on expanding the "emerging India" sectors make it an interesting investment destination. While the size of investment was not disclosed, it is learnt that TVS Capital has picked up 2.5% in the stake sale.

Established in 1943, Ratnakar Bank is a scheduled commercial bank with a network of 98 licensed branches spread across Maharashtra, Gujarat, Delhi, Karnataka & Goa. It has assets exceeding Rs 2,086 crore and deposits of Rs 1585 crore as of March 2010. According to Care Ratings, the bank had a total income of Rs 157.39 crore with a net profit of Rs 19.4 crore during FY10. The bank’s Capital Adequacy Ratio (CAR) under BASEL II stood at a comfortable 34.07% with a Tier I ratio of 33.53%.

Vishwavir Ahuja, who headed Bank of America’s Indian unit till 2009, joined Ratnakar as its managing director and chief executive last year.  It also appointed former Morgan Stanley India CEO Narayan   Ramachandran to its board.

The bank has built up a senior management by appointing executives from various private sector financial services firms. The team includes Rajeev Ahuja (ex-Head, Fixed Income Capital Markets and Sales,    Citibank), Shashank Mukherji (existing leadership in the Bank), Nitin Chopra (ex-CEO of Bharti Axa Life Insurance), Sunil Gulati (ex-Group President, Corporate & Institutional Banking, YES Bank), Suhas Sahakari (ex-Head, SME Business, Axis Bank), Shanta Vallury (ex-Head, Liabilities Distribution, ICICI Bank) and Naresh Karia (ex-Country Controller, Citibank).

Srinivasan asserted that the bank's focus on empowering its middle management team is a huge positive and that it is suitably poised to provide modern financial services to emerging large companies, small &  medium enterprises, retail banking segments and the largely untapped financial inclusion segment, and emerge as the ‘bank of choice’ in the segments that they operate. He added that as the banking  regulations in the country become more liberal and there is more consolidation in the industry as expected, Ratnakar Bank can prove to be a profitable exit in due course.

This is the first investment by TVS Capital in the banking and financial services space. The firm recently sealed two deals in the restaurants space by taking stakes in chef Sanjeev Kapoor's Indian Cookery Private Limited and Om Pizzas & Eats, the Indian franchisee of Papa John’s Pizza.

Annex Fund On The Cards

With its investment in Ratnakar Bank, TVS Capital will have about 65% of the capital committed from its fund under management. The asset management firm also plans to raise a follow-on or an Annex fund which would be two-thirds of the size of the current fund, Srinivasan added. This would take the size of Rs 600 crore TVS Shriram Growth Fund I to Rs 1,000 crore.

TVS Capital has also invested in media firm 9.9 Mediaworx, logistics solutions provider TVS Logistics, facilities management company Dusters Hospitality, book retailer Landmark and Medfort Hospitals, a   healthcare firm focused on eye and diabetes care.

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