Floating public firms to raise funds for venture capital or private equity investments is gaining traction in India. After Kishore Biyani led Future Group announced that it would raise funds for Future Ventures Shiv Nadar-promoted HCL Enterprise, which owns HCL Technologies and HCL Infosystems, is now planning to form such a VC arm and is looking to tap the bourses to raise close to $1 billion for investments in the IT sector. According to this report the plan is at an early stage, the initiative will be headed by Shiv Nadar himself and the top executives of HCL have been in touch with the I-bankers involved in the Future Ventures’ issue to understand the process.
The phenomena of VCs and PE firms raising money through the capital market is not new internationally. For instance, Wallenberg Family controlled Investor AB (which owns venture funds) is listed on the Nordic exchange and veteran investor Warren Buffet’s Berkshire Hathway
is also a public firm. In recent a number of large PE firms including Blackstone have made moves to enter the public domain. However in India it is a recent phenomena with Future Venture being the first which is looking to raise around Rs 3,700 crore through an IPO.
What would be interesting to see whether Nadars will raise the funds in India. Early this year in May Shiv Nadar had indicated plans of raising a special purpose acquisition company (SPAC) at NYSE Euronext. “In India, you can’t float a SPAC. Even in Europe, it’s very new. On Euronext, we would probably be floating one, maybe one of the earliest,” he had said back then without hinting at the size of the proposed SPAC.
SPACs are usually raised by asset managers, merchant bankers or private equity investors who use it as a fund raising route to strike buyout deals. By character, SPACs are a more liquid form of private equity which usually focuses on a single buyout rather than a portfolio of transactions by a conventional private equity fund.
Usually SPACs restrict themselves to targeting small and mid-sized companies. This also separates them from large private equity funds. Some of the key India-focused SPACs have been Millennium India Acquisition Company (MIAC) and Indian Hospitality Corporation (IHC).
The US-listed MIAC acquired 14.9% stake in Delhi-based brokerage firm SMC Global for about $40 million last year while London’s AIM-listed IHC acquired Mars Restaurants and SkyGourmet Catering for $110 million.