| Private equity (PE) funds floated by Indian brokerages are making big inroads into the world of smaller companies as bigger PEs stay away from them. |
| Brokerages such as Motilal Oswal, Religare, JM Financial, Edelweiss, Anand Rathi Securities, IDBI Capital Markets, which together manage over Rs 2,600 crore, are seeing opportunities in the small-cap space, providing the much-needed expansion capital to entrepreneurs, who otherwise find it tough to raise funds to meet their capital requirements. |
| "There are a lot of small and medium-sized companies in the growth trajectory that requires capital. These SMEs will catapult themselves to large companies. Since many of them are first generation entrepreneurs, they may not have enough capital of their own. So the PEs help them. Apart from just funding the capital requirements, we help these companies to have the right kind of senior management team on board, help to put in place the financial systems, the corporate governance structure and help them in strategic growth as we interact with various investment bankers," said Vishal Tulsyan, CEO, Motilal Oswal Venture Capital. |
| "We see immense opportunities in pharma, financial services, healthcare and even logistics companies. We don't invest on a passive basis, but we take active interest in mergers and acquisition committees, audit committees and in the management of the company so that we can add value to other shareholders of the company," said Dilip Kothari, managing director of JM Financial India Fund, which has a corpus of $225 million. |
| The fund has already invested in companies like Genesis Colours and Sona Group. |
| IDBI Capital Market Services, the broking and financial subsidiary of IDBI, launched a Rs 50 crore private equity fund aimed at funding small and mid-sized companies. The company along with other PEs such as Sidbi Ventures have invested in GSPC Gas, a subsidiary of Gujarat State Petroleum Corporation. |
| "Our funding depends on the type of business the company is into. We identify companies with extremely good business models and preferably unique approaches, and welcome such companies to approach us. It is difficult for small companies to get public capital and so they approach us," said A A Sarma, executive vice-president of IDBI Capital Market Services. |
| "We will have a seat on the board of the company depending on our investments. The space is large for every player and it would take time for competition to build up within the space," he added. |
| However, Kothari defers with this. "There is competition and it is healthy and helps growth. And what ultimately matters is what one brings to the table," he said. |
| Motilal Oswal Financial, which has a $100 million PE fund, is focusing on providing growth capital to small and medium enterprises, typically in the range of $3-7 million per company. |
| "The favourable macroeconomic environment in the country is helping SMEs to flourish. A surge in economic activity in this segment is driven by the network effect of a variety of positive macroeconomic factors, thereby creating a growing entrepreneurial base in India," said a company official. |
| Others such as Religare, the financial services arm of Ranbaxy's promoter-family, has a $150 million private equity fund with the US-based Evercore Partners, while Edelweiss Capital, which has a 30 per cent stake in a private equity fund Blue River Capital, also has a real estate fund with Rs 150 crore corpus. |
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