Had turned down a US PE offer to buy its infra fund, citing low valuation.
William Knight, a UK-based former director of Axis Private Equity who resigned last week, has cited the board’s decision to reject a new buyout proposal from a US-based PE major as the reason for his departure from the company.
Sources familiar with the developments said last week, Axis PE’s board turned down an offer from the US-based PE major to buy its infrastructure fund citing a low valuation. A proposal was made by the US PE major, which handles about $7 billion under management, in February-end.
In his letter to the board dated March 4, Knight said the proposal, if accepted, would have enabled Axis Bank to achieve its “publicly stated aim of exiting the ownership of Axis PE”.
Knight told Business Standard that “It was a very good proposal and provided a way that would have enabled the company to go forward in a manner that would benefit its unit holders. The majority decision of the board to reject the proposal and to retract and diminish the business, left me with the conclusion that my future value to the company as an independent voice on the board would in future be very limited. Therefore, I wished to leave and use my time where I could bring my experience to bear to more positive effect.”
Knight also said, “The decision to wind down the company, not to seek any future investors, diluting the management team, etc without possibly prior discussion with all the existing investors or show any concrete evidence that the consent of the existing investors to such a course of action had been given, was also wrong” When contacted, an Axis Bank spokesperson said, “Axis PE from time to time has been approached with various proposals and they are engaged in an ongoing dialogue. Since this is a confidential matter of the board, we would not like to comment on any specific proposal. As far as the business is concerned, we have indicated that we have dropped plans of selling the Investment Manager and are continuing to run the business in the normal course.”
Axis Bank’s PE arm had raised Rs 600 crore through its first fund, Axis Infrastructure Fund. Axis Bank, the anchor investor, invested about Rs 225 crore. Public Sector banks such as Canara Bank, Bank of Baroda, Union Bank of India, United Bank, Corporation Bank, Syndicate Bank and Punjab National Bank invested about Rs 200 crore. Mails sent to Shikha Sharma, CEO, did not elicit any response. Alok Gupta, former MD& CEO, Axis PE declined to comment when contacted. Managing director of one of the portfolio companies where Axis PE invested said, “A due diligence had taken place with us in January this year with the fund and we expected a better valuation once the deal was closed. We feel that the proposed plan to wind down Axis PE’s fund will devalue the portfolio companies.”
Axis PE’s investments include Rs 126 crore in Harish Chandra (India), Rs 75 crore in Neesa Leisure and Rs 67 crore in Corrtech International Pvt Ltd, Rs 60 crore in Vishwa Infrastructures and Services and Rs 54 crore in Shalivahana Green Energy. When contacted, the general manager, treasury of a public sector bank said, “We are unaware of the proposal made by the US firm. I think it could be a recent development. Without seeing the offer, we are unable to tell anything more.” The CMD of another national bank refused to comment on whether they received any information from Axis PE on the recent offer.
At the end of 2009, Shikha Sharma, CEO, Axis Bank ,planned to spin off the private equity business and sell off the arm to another PE firms. IL&FS Investment Managers, Aditya Birla Private Equity, Shapoorji Pallonji group, Edelweiss Capital, Elephant Capital and US-based Darby Private Equity were in the race to acquire Axis PE. However, the discussions with domestic investors did not reach any conclusion.
