Ever tried turning an ocean liner like you do a speed boat ?
Nah… When you want to turn a speedboat, you turn the wheel. For an ocean liner, you have to plan two days ahead. RMS Titanic couldn’t swerve the iceberg because of it. The only tribe that seems to have managed it so well is Private Equity managers. The ocean liner metaphor here is to a Public company and the speed boat is what it becomes in the hands of private equity. I am referring to the art of buying out companies, sprucing them up and staging lucrative exits. It calls for a lot of guts.
I really wish the trend to pick up in India. Like many firsts to its credit, ICICI Venture can deservedly bag this too – why not…when it’s slogan is “fueling your aspirations”. If she can pull it off, Renuka Ramnath, CEO will surely be tap dancing her way to office soon after laughing her way to the bank.
As per this report, ICICI Venture, the country's largest venture capital firm, is likely to make a return of four times on its cost of acquisition. It had acquired the refractories business from ACC for about Rs 250 crore in 2005. Of that roughly 40% (Rs 100 crore) was equity and the balance was debt. ICICI Venture expects the prospective buyer to shell out Rs 550 crore. Taking out the debt portion of Rs 150 crore, the return on its investment will be Rs 400 crore, equalling four times returns.
UBS Securities is believed to be advisor to ICICI Venture for the sale of ACE. If ICICI Venture is successful in selling ACE, it would be its first exit from a company, in which it has made a complete buyout. Other companies where it has gone in for a buyout include Infomedia India (formerly, Tata Infomedia) and VA-Tech India (engineering services firm).
The ease with which you flip, is a function of timing and discretion. The next opportunity that’s lying in wait often prods it and the cycle rides on. Too bad these guys not being at the wheel of the Titanic on that fateful night…!
Happy flippin’….Renuka !