Milestone Capital, which is looking for potential buyers after its founder Ved Prakash Arya died in a freak accident two months ago, is looking to conclude a transaction by March 2012, sources privy to the development told VCCircle. The homegrown alternate asset management company, which is seeking a valuation of Rs 300 crore, will begin to shortlist bids by next month.
However, sources add that the current crop of offers made to Milestone is in the range of Rs 150-200 crore. It is also learnt that L&T Finance and Edelweiss Financial Services have emerged as the front runners to the sale process.
In reply to an e-mail query, a spokesperson for Milestone Capital said, “At this point, we would not like to make any comment on such matters and please be assured that we will connect to you once we have something to disclose officially.”
Milestone has already appointed Standard Chartered Bank to find potential buyers. The company has also received bids from a variety of parties. “We have received interests from a wide variety of players including global multi-billion-dollar private equity funds, big corporate houses who want to get into private equity business, real estate developers who want to partner strategically, as well as other asset management firms,” said Arvind Bansal, one of the directors at Milestone Capital, while talking to VCCircle two months ago.
Valuation
Milestone is primarily into two businesses – private equity and real estate investments – and has joint ventures in both these practice areas. It has 40 per cent stake in a joint venture with the country’s largest PE firm IL&FS Investment Managers Ltd for two real estate funds and a separate JV with financial services group Religare for private equity. It has also invested in more than a dozen companies across real estate and private equity space.
Milestone independently runs two domestic schemes, MDS-I and MDS-II, with a committed corpus of Rs 230 crore and Rs 510 crore, respectively. After Arya’s death, the investment firm has been able to raise a domestic real estate fund of Rs 400 crore and has exited Resonance Eduventures (a test preparatory company) in a secondary transaction. It is in the process of exiting from the ratings company CARE (via an IPO).
Typically, asset management companies fetch anywhere between 8-12 per cent of their assets under management. Milestone Capital has total assets under management nearing $1 billion and that translates into a valuation of $80 million.
However, there is a caveat attached to it. Unlike pure PE firms who largely raise funds through institutional investors or long-term base of LPs, one of Milestone Cap's investment ventures Milestone Religare has raised funds from high networth individuals. In such a scenario, the valuation of Milestone has more semblance of a mutual fund which is typically valued at about 4-5 per cent of assets under management, say industry experts. This could explain the size of current bids.
The country’s largest PE firm IL&FS Investment Managers Ltd, which is a public-listed firm, that has assets under management of around $3.2 billion or a little over three times that of Milestone Capital has a market cap of Rs 557 crore or around 3.3x its AUM and 8x its PAT for FY2011.
According to industry experts, consolidation move with another asset management firm will ensure continuity of operations and may also prevent the flight of capital from its investors. Also, investors are quite likely to welcome such a move, as long as they have the confidence that the acquirer has the depth and the experience to smoothly absorb and integrate the people and operations of such a fund.