Aureos of UK looks to invest in small firms

Aureos, a private equity firm that manages a large chunk of the UK government's investments into small private companies in developing economies, has kicked off its India innings.

The five-year-old London-based company, started by former employees of the UK government-funded Commonwealth Development Council (CDC), is looking out for small businesses keen on transforming themselves into full-fledged, structured companies.

At present, nearly one-fourth of the funds managed by Aureos belong to the CDC, creating a unique mandate for the fund to invest only in small businesses and ensure a high level of corporate governance.

"Except in India, we have investments of more than $500 million in most developing regions of the world. For India, we are a little late as we took over the original CDC country fund the formation of the firm five years ago," Sai Vettivetpillai, CEO, Aureos.

It expects to invest in around two dozen companies in India at around Rs 20 crore in each company.

"We have already invested in a Mumbai-based clinical research company and our scouts have been meeting with the managements of around 50 companies a month for the last four months," said Robert Binyon of Aureos' Indian wing.

Despite the high sampling rate, the company says the finding of companies of the right calibre remains a challenge in India, as much as it is in the rest of the world.

"Basically, we are looking for 3- to 7-year-old companies whose managements show promises," said Binyon's compatriot Nilesh Mehta. "Which have seen a complete cycle with both an upswing and a downswing in their business and are now starting to feel the need for professional management as they scale up," he added.

As in Africa and South America, the fund has had its share of interesting experiences in India too, as it hunted for the right management "� may be not so much the right business.

"During one of our meetings, we came across a business which was owned and controlled by a family. The person who actually ran the company had to negotiate with his uncles, cousins, nephews etc, all of whom had a say in its running. When we approached him, he was very happy as he could finally see an opportunity to push through some tough professional decisions," Vettivetpillai said.

The fund, which has stakes in 186 companies worldwide, operates in India through its four-member scout team based in Bangalore and Mumbai, and expects to deploy a chunk of its $100 million set apart for the country over the rest of this financial year. The Aureos management expects the investments to be skewed towards the service industry.