Mumbai: IDFC has started work on exiting the infrastructure and private equity funds management business, IDFC Alternatives, which has assets worth Rs 17,000 crore ($2.6 billion). This could lead to the senior management of
IDFC Alternatives spinning it out as an independent entity backed by one of its global sponsors, people directly aware of the matter said.
IDFC Alternatives consists of three asset classes — infrastructure, real estate and generic private equity investments — and has been one of the longest running risk investment managers in the country. IDFC’s move to exit the franchise is independent of its ongoing merger discussions with Shriram Group, though the alternatives business would not have found place in the proposed combine, sources said.
When contacted, an IDFC spokesperson offered no comments.
The Alternatives business is not a part of IDFC Asset Management Company, one of the country’s largest mutual fund houses with Rs 65,000 crore in AUM. Nevertheless, the exit deal signals the marginalisation of Indian financial institutions in the alternate asset management industry where IL&FS, IDFC and ICICI dominated in the past decade.
Sources mentioned earlier in the report said IDFC would run a sale process, though the likelihood of the M K Sinha-led management spinning out as an independent investment manager with the support of existing global sponsors was a strong possibility. Sinha and his team have been on investment mode in infrastructure verticals like roads, renewable energy and power transmission and distribution.
Last year, he had mentioned plans to partner with a global investor to tap real estate opportunities anew, though it did not progress. The portfolio of IDFC Alternatives include road developers such as Ashoka Highways and Gayatri Projects; energy companies like GMR, Adhunik Power and ONGC Tripura Power Company, besides consumer companies like Parag Milk Foods.
The number of Indian alternate asset managers — firms managing long-term risk investors eyeing higher yields — have shrunk dramatically in the past few years as poor returns from private equity, infrastructure and real estate investments have forced them to consolidate capital with fewer funds.