MUMBAI, Feb 6: Unit Trust of India has decided to sell off its 50 per cent stake in TDICI Ltd -- the country's largest and oldest venture capital fund -- to the co-promoter Industrial Credit & Investment Corporation of India (ICICI). The venture capital fund, jointly floated by UTI and the term lending institution in 1988, manages five funds aggregating Rs 800 crore."It was floated at a time when venture capital fund was the most tax efficient vehicle. Now we have decided to acquire the entire stake... It is nothing but consolidation," an ICICI source said under condition of anonymity.
TDICI Ltd -- formerly known as Techonology Development & Information Company of India Ltd -- was founded joinlty by UTI and ICICI with the objective of providing private equity to companies in the small and medium sector.
Over the last nine years it has emerged as the leading private equity asset management company in India with investments of about $88 million in 275 companies as of December 31, 1996.
TDICI, whichruns a corpus of Rs 800 crore, has an equity base of Rs 3 crore.TDICI has been managing five funds. They are Vecaus-I (venture capital unit scheme), Vecaus-II, Vecaus-I (rights), Software Fund and TCW/ICICI Private Equity Fund. The Vecaus funds -- all close-ended schemes -- have been fully invested and are presently in the divestment phase.
The list of investors in the domestic funds includes ICICI, UTI, banks and corporates and multilateral agencies like the International Finance Corporation and the Commonwealth Development Corporation.
The software fund and the offshore fund (TCW/ICICI Private Equity Fund) are currently being invested.
The offshore fund, domiciled in Mauritius, was set up last year following a strategic alliance between ICICI and Trust Company of the West (TCW), a US-based large asset management fund managing assets over $53 billion. Established in 1971, the TCW group is in the business of investment management services. The offshore fund is a closed-ended seven-year fund with atargeted size of $125 million.
"The Vacaus funds were mobilised by ICICI and UTI. Since they are all fully invested, it makes sense for ICICI to go it alone in TDICI. The term-lending institution virtually controls the offshore fund alone as the fund is primarily being mobilised by TCW, incorporated in Mauritius and owned by ICICI and the US-based TCW group," industry analysts pointed out.
TDICI is the exclusive investment advisor to TCW/ICICI India Private Equity Fund.
TDICI invests in a broad range of industries and companies at all stages of development, from start-ups to expansion financing in emerging growth companies to management buyouts. Bulk of its exposure has been in areas like information technology, healthcare and light engineering industries. It prefers to invest a mimimum of $1 million in each company and mezzanine investments fall in the range of $3-5 million.
TDICI's preferred exit is through disinvestment on the public market after the investee companies shares are listed. It alsoresorts to sale to the management or a third party or a buyback arrangement with the company subject to regulatory requirements.
With the latest acquisition, the list of wholly-owned ICICI subsidiaries will include ICICI Asset Management Co, ICICI Trust Ltd, ICICI Investors' Services Ltd, ICICI Brokerage Services Ltd, ICICI Credit Corporation Ltd and SCICI Securities Ltd. Besides, it holds majority stake in ICICI Banking Corporation and ICICI Securities & Finance Ltd.
INSIGHT
right decision by UTI
ICICI's acquisition of TDICI is in keeping with its core competence as a development financial institution. Venture capital funds are one way assisting companies with long-term capital, and investing in venture capital funds will be complementary to ICICI's activities as a long-term lender. UTI, on the other hand, is not in the business of providing long-term capital to industry, and its decision to sell in favour of ICICI is the right one.
Copyright © 1998 Indian Express Newspapers (Bombay) Ltd.
