27th September 2009, www.nation.lk, By Indika Sakalasooriya
Singapore based Calamander Group, which recently started a private equity fund focussed just on Sri Lanka has enhanced the size of the fund following the encouraging reception it has received from interested parties, a top Calamander official, told The Nation Economist.
“At the time of establishing the fund, we expected to raise US $ 50 million. But the response from interested parties was so encouraging that we decided to increase the fund’s size to US $ 75 million,” Mafaz Ishaq, Director, Calamander Capital Ltd/Calamander Group said.
Calamander Capital Ltd is a fully owned subsidiary of Calamander Group which handles the Group’s Sri Lankan operations.
“Because of this we had to extend the date of the first closure which was scheduled on October 31 to November 14. We currently have more than US $ 20 million in commitments and we expect it will reach the US $ 75 million target before the closure”
“However, at the time of the final closure of the fund that falls in March 31, 2010, we expect to raise US $ 100 to 150 million,” Ishaq added.
When asked whether the fund has marked down the properties it plans to invest in, he said that 80 to 90 percent of the potential investments are already earmarked.
At the time of initiating the fund back in June, Calamander said the fund would mainly invest in commodities, banks, ceramics and fisheries.
“I have been in Sri Lanka for the last two years and we know that Sri Lanka’s competitive advantage lies with commodities. Therefore our major emphasis would no doubt be on tea, rubber and coconut”.
“We won’t be investing in plantations but downstream operations such as tea factories and value addition operations. But currently we are following a ‘go slow’ approach for potential ceramic industry investments due to possible energy costs that may hamper the sector” Ishaq remarked.
He also revealed that more than a dozen of tea factories are currently on fund’s radar, but was reluctant to disclose their names.
“The business plan we have mapped for the fund is that, we will be doing buy outs—we will acquire the majority stake of the companies we invest in. Then our approach would be value addition and complete turn around of the entity.”
“We are also looking at the banking sector very eagerly because Sri Lanka has a pretty conservative but very sound banking sector. We will be investing in a few selected blue chip banks listed in the country’s stock market”
Talking about the fund’s exit strategy in the future, Ishaq said it could be done either through trade sales or Initial Public Offerings (IPO).
“For our potential investments in tea, the exit strategy would mainly be trade sales, but for the investments in rubber, coconut and ceramic it could probably be through IPOs”
When queried about the Calamander Group’s investments in Sri Lanka before the private equity fund, Ishaq said that the Group has had investments in properties in the country over a decade.
“Calamander Group currently has more than US $ 4.5 million worth of investments in real estate in almost all the key provinces in the country, under various investment vessels. We have real estate in Colombo, Kandy and Southern and Eastern parts of the country”
“We are planning to set up boutique hotels in some of these properties, possibly as joint ventures, since the country’s tourism sector is expected to do extremely well” he said.
He also said that Calamander Group in its personal capacity may take an interest in the country’s equity market in the future, but cited lack of liquidity in the market and high broker charges as discouraging factors for them to enter Colombo bourse.