More dedicated private equity funds to be launched in SL
NDB Capital Holdings PLC, having launched Emerald Sri Lanka Fund, a private equity fund dedicated to Sri Lanka on Monday, is now aiming to launch more such funds.
“We can see an appetite for such funds. After this fund is closed, we will launch Emerald Sri Lanka Fund 2,” Vajira Kulatilleke, CEO NDB Capital Holdings told the Business Times on the sidelines of a media conference to launch this fund.
The US$ 50 million Emerald Sri Lanka Fund will invest in small and mid-sized businesses seeking expansion capital in Sri Lanka. The Fund Manager, NDB Zephyr Partners, is jointly owned by NDB Capital Holdings PLC and Zephyr Management LP, the New York-based global emerging markets investment firm.
Sri Lankan SMEs currently have limited equity raising options until they launch an IPO. According to Mr. Kulatilleke, most Sri Lankan businesses do not have access to listed equity market /IPO due to lack of a requisite scale, the need to enhance corporate structure, transparency and also the need to improve governance and not being able to convince the growth potential to investors to have a successful IPO. “There’s a gap in the Sri Lankan capital market for private equity. The economy is growing and companies, especially small and medium – sized enterprises (SMEs) are growing rapidly and they need an equity base. Also many SMEs are not ready for an IPO, due to their small size, lack of management depth and inadequate governance. NDB Zephyr will assist its portfolio companies in areas such as strategic planning, management development, financial management, corporate governance and operational efficiencies.”
The fund will seek to invest $2 million to $6 million in fast growing businesses with characteristics such as capital efficient businesses with sustainable competitive advantages, proven business models and high degree of operating leverage business expertise that can be leveraged to expand to other emerging markets. Also those which are EBITDA (earnings before interest, taxes, depreciation, and amortization) profitable or clear path to EBITDA profitability, businesses lead by management teams willing to “professionalize” the business focus on execution ability, and businesses which have the potential to reach exit scale in 3-5 years.
The Fund Manager will also help the portfolio companies in accessing international markets and optimizing their capital structures.
The fund will be the largest private equity fund dedicated for Sri Lanka and its investors include some of the most experienced investors in emerging markets including IFC, a member of the World Bank Group, DEG (Deutsche Investitions-und Entwicklungs Gesellscaft GmbH) and FMO (the Netherlands Development Finance Company).
Rajendra Theagarajah, CEO of NDB Group said, “NDB is pleased to take the leadership role in the launch of this Sri Lanka dedicated private equity fund. We believe that the launch of the Emerald Fund will help facilitate the emergence of a new industry that will serve many Sri Lankan companies in the year to come.”
Thomas Barry, Founder and CEO of Zephyr Management stated, “We are excited about our participation in the first institutional private equity fund in Sri Lanka. NDB’s strong reputation and experience in the Sri Lanka capital markets will provide the Fund’s investment team with much needed local experience, knowledge and relationships’.