Private equity jinx continues
The Sri Lankan arm of New Yorkbased frontier market equity firm Logan Rockefeller (L.R Global) is likely to close down all its local operations in the near future, Mirror Business learns.
The firm, which first arrived in July 2010, has maintained a nominal representation in Sri Lanka until the closing of its offices last month.
When contacted by Mirror Business, LR Global Lanka Managing Partner, Chanaka Wickramasuriya declined to comment.
L.R. Global Lanka had previously made major investments in Expolanka Holdings PLC, Laugfs Holdings PLC and DelmageGroup.
When contacted, L.R. Global Lanka’s former Managing Director, and current Delmage Group Managing Director, Channa De Silva confirmed that the equity firm’s investment in Delmage is currently intact.
Sri Lanka has had a poor history with regard to the performance of private equi- ty firms with L.R Global joining the ranks of Leopard Capital Sri Lanka, a unit of Singapore’s Leopard Capital, which closed and returned money to its investors in November 2011. Notably, L.R Global’s Sri Lanka fund launch in 2011 was subsequently granted an International Finance Company (IFC) commitment of US$ 10 million in June the same year. However the funds were ultimately not utilized and have since expired.
“Our commitment to L.R. Global has expired. However IFC is still looking to support institutional private equity in Sri Lanka. The difficulty in raising funds has discouraged the expansion and setting up of private equity, but opportunities still exist for the right team and correct structure.” “These firms typically look at longer-term investment horizons and we have seen many good Sri Lankan companies that present strong investment opportunities. Therefore IFC remains confident with regard to the development of this segment,” IFC Country ManagerforSriLanka,AdamSacksaid.
IFC is still looking to support institutional private equity in Sri Lanka. The difficulty in raising funds has
discouraged the expansion and setting up of private equity, but opportunities still exist for the right team
and correct structure
The Abraaj Group, formerly known as Aureos Capital is another private equity firm which has closed its Sri Lankan offices while still maintaining its investments in Sri Lanka.
Commenting on other factors inhibiting the growth of private equity in Sri Lanka, Heraymila Securities Limited CEO Ravi Abeysuriya highlighted difficulties for funds in exiting investments at a premium in addition to short-term investment horizons and a lack of innovative companies as key challenges.”
“Usually these firms look for a 2-3 year exit period, but given the prevalent market conditions, it has been difficult for them to exit at a premium. Additionally, there aren’t enough innovative companies for these investors to work with.”
The final issue is that many of these firms have been too myopic with their investments. Instead of bringing investments and working with the companies to add value, they neglected this role to the detriment of themselves and the market” he said.
In that re g ard, Abesuriya welcomed measures taken by the Securities and Exchange Commission to restrict institutional private equity from exiting for a period of one year from the date of listing.
Among other private equity firms currently operational in Sri Lanka are Jupiter Capital Partners and Calamander Capital, who led a rather unsuccessful attempt to set-up a Sri Lanka Fund in 2009.
Calamander has since made progress in early stage investing having closed four deals and two buyouts in the last two years.