The Hindu Business Line : PE investors betting big on natural resources cos

Bullish trend
Globally, natural resources stock funds have returned about 34 per cent this year.
These funds have about Rs 2.88 lakh crore in assets.
Reliance MF and DSP Merrill Lynch have filed draft prospectuses for funds to invest in equities of companies operating in natural resources.

BL Research Bureau

While companies engaged in infrastructure may be the apple of the eye for investors making a beeline for Asia, a group of private equity (PE) investors think differently. They are looking to cash in on the growth of companies that focus on natural resources in India and China.

A group of PE investors has appointed investment and strategic advisory company Origo Sino-India as their consultant. “Origo is raising at least $100 million (Rs 400 crore) for the proposed fund which is going to invest in companies that operate in iron ore, renewable energy, coal, wood/forestry and other relevant sectors,” a spokesperson told Business Line.

Investment value

Though tight-lipped on likely targets, Origo said it has a pipeline of pre-identified investment opportunities, including letters of interest in respect of 11 potential investments in natural resources with a potential commitment value of about $137 million (Rs 550 crore).

A large range of natural resources is needed to help growth in India and China and that seems to be the fundamental reason behind opting for a natural resource fund, the official said. This is Origo’s first assignment as fund consultant and it is in talks with institutional investors in London to raise the money, he added. Globally, natural resources stock funds have returned about 34 per cent this year , according to fund tracking company Morningstar that adds that these funds have about $72 billion (Rs 2.88 lakh crore) in assets.

In India, Reliance Mutual Fund and DSP Merrill Lynch have filed draft prospectuses for funds that would seek to invest in equities of companies operating in natural resources. However, PE funds generally invest in unlisted companies and exit by selling their stake when the investee company sells shares in an IPO. Origo is aligned with SBI Capital Markets in India to provide a source of deal flow while it works closely with China Equity in China. Mr Dipankar Basu, a former chairman of State Bank of India, is on the Origo board.

Origo holds a 20 per cent stake in Hyderabad-based Roshini International Bio Energy Corporation and a three per cent stake in Fomento International, which are engaged in bio-energy and mining respectively. Recently, BSE-listed Everest Kanto Cylinder has also engaged Origo to assist in expanding its business in China by focussing and assisting in sourcing high growth, merger and acquisition opportunities.

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PE investors betting big on natural resources cos