Tata Capital, PFC to invest $100m in 51:49 PE fund

Tags: Companies

Fund to invest in power generation, electricity metering, coal haulage units

Tata Capital, the non-banking financial services arm of the $100 billion cars-to-steel Tata group, and state-owned Power Finance Corporation (PFC) will be investing around $100 million (Rs 543 crore) in the proposed 51:49 private equity fund to be set up by both entities.

“While the Tata group will contribute around 5 per cent of the funds corpus, PFC will contribute another 5 per cent of the corpus,” said a senior Tata group official. Tata Capital had one of the largest fund raisings by any Indian PE fund manager in the recent past. The brand of the group and the expertise of its PE team and its ability to raise funds from international investors particularly from the Japan and Asian region is believed to have been the key drivers for PFC approaching the Tatas for a partnership.

“PFC will lead the domestic fund raising exercise leveraging its relationship among public sector institutions such as banks and insurance companies in India. We expect the domestic tranche of this $1 billion (Rs 5,425 crore) fund will be approximately 40 per cent of the fund size,” said a top Tata Capital official familiar with the discussions. The balance 60 per cent will be raised from investors in Asia and Japan leveraging on Tata Capital’s tie-up with Mizuho Securities.

The 51:49 shareholding structure in favour of the Tatas for the asset management firm that will manage the fund, is designed to keep the firm out of purview of the comptroller & auditor general’s audit and rules applicable to public sector understakings. The Tatas are expected to ensure a proper governance structure is put in place to discharge fiduciary responsibilities towards investors and focus on exits as well.

“The fund will invest in power generation projects as well as upstream and downstream activities ranging from electricity metering to coal transportation facilities for a thermal power generation unit,” said the top Tata Capital official. The fund also plans to take a minority stake in thermal power projects of 500-600 mw and above wherein it will help meet a part of the promoters equity contribution. “Our typical investments will be in the range of $50-100 million,” said the official.

The launch of the fund will make PFC a holistic provider of financial solutions as apart from debt it would also be able to provide some equity support to deserving projects leveraging the funds resource pool. PFC has outstanding loan sanctions of Rs 1,68,000 crore and has experience of dealing with almost every major power producer in India.



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