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New Silk Route tries to come out of Rajat Gupta's shadow

By Reghu Balakrishnan
December 13, 2011 12:07 IST
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Rajat GuptaNew Silk Route, private equity major, is trying hard to come out of the shadows of co-founder Rajat Gupta, who has been accused of providing tips to another co-founder, convicted insider trader, Raj Rajaratnam.

NSR says it is business as usual.

It has initiated an image makeover by appointing an advisory group comprising veterans from corporate houses, financial institutions and foreign institutions.

Parag Saxena, CEO & founder-partner, said the advisory board was being formed to help with portfolio companies and 'introduce it to capital markets'.

"We are looking at six to seven experts from  companies, financial institutions and supra-national organisations, amongst others," he told Business Standard.

He refused to disclose more details.

He said, Gupta's exit did not necessitate any changes within NSR.

"Gupta was never involved with the day-to-day running of the portfolio. He was never on any of the boards of any of the 15 portfolio companies," he said.

The head of private equity practices with a global advisory firm said the move to appoint an advisory group was a 'clear signal' that the company was adapting to global standards as a private equity firm.

"Rather than connecting to Rajat Gupta issues, this move could be in line with activities of other PE majors such as Bain, KKR and Blackstone, which have advisory groups comprising industry veterans," he added.

To return money to its investors, NSR also set its eye on exiting from its portfolio companies.

NSR, which invested about $750 million in 14 portfolio companies, has made just one exit so far.

The private equity made a partial exit from Destimoney Securities, a wholly-owned subsidiary of Destimoney Enterprises -- formerly known as Dawnay Day AV Financial Services.

"We expect that a four-year period from the fund's closing in late 2008 is a reasonable time to expect exits," said Saxena.

"We hope to realise some exits during the next 12 months. We cannot comment on specific exit strategies at this time."

However, a few of NSR's investments, such as KS Oils, are still in trouble.

NSR had invested about Rs 135 crore (Rs 1.35 billion) in KS Oils in 2009, by paying Rs 48 per share, for a stake of seven per cent.

This year, shares of KS Oils dived after reports that the company faced Rs 400-crore (Rs 4 billion) loss related to trading in mustard oil futures by promoters.

Currently, KS Oils shares are trading at Rs 6.7/ share on the Bombay Stock Exchange. NSR currently holds 9.48 per cent in KS Oils.

Investment banking sources said the Gupta association did act as a hurdle in certain deals like, Indian Oil Tankage.

Saxena, though, remains optimistic about the next fund-raising of NSR. "Our LPs (limited partners or investors) have been very supportive and all capital calls have been met. No key-man clause has been triggered by recent events," he says.

"We expect usual and customary provisions in any future fund-raising. Our investment anticipated investing through late 2013 and we are on plan."

New Silk Route is an Asia-focused growth capital firm founded in 2006 with $1.4 billion under management, focused on the Indian subcontinent, as well as other economies in Asia and North Africa.

"We have seen no impact by Rajat Gupta issue on our performance, and don't expect any such impact in the future," Saxena said.

"We are seeing a strong pipeline for new investments and are very excited about the prospects for our existing portfolio and future investment opportunities in the region."

Image: Rajat Gupta

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Reghu Balakrishnan in Mumbai
Source: source
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