Amidst global private equity investment firms making a beeline for India and the growing dominance of PE players in the M&A deals executed by India Inc, US-based banking giant Bank of America has pulled curtains on its private equity division in Mumbai.
In a surprising development, the global major has shut down its Bank of America Equity Partners (BAEP) unit, which was set up as part of the company's expansion plans in this region in 1997.
A company spokesperson told PTI, "BAEP is a very small operation and was not strategic to our goals in that area of the private equity business."
The Indian subsidiary was established with an aim of providing development capital to companies in various high-growth industries such as technology.
Globally, BAEP is one of the largest PE portfolio managers in the banking industry and manages an estimated overall capital of over $6 billion (about Rs 30,000 crore).
At one point of time, the Indian unit was estimated to be running a book of over Rs 200 crore (Rs 2 billion) and had invested in companies like Wockhardt, Cadila Healthcare, DSQ Software and Himachal Futuristic Communications Ltd.
The company sources said that the decision to shut down the unit was taken a few months back after some of its investment decisions failed to yield the desired results, leading to various measures such as headcount reductions in steps and ultimately a final closure.
However, the decision does not impact Bank of America's other banking operations in the country as both the units were functioning independently.
Closure of BAEP unit in India comes amidst a significant surge in private equity investments in the country. According to a recent report from global consultancy major PricewaterhouseCoopers, PE and venture capital investments in the country are expected to further rise over the next 6-12 months.
Moreover, PE firms have played a significant role in the corporate India's merger and acquisitions overdrive in the recent past. The four biggest overseas acquisitions made by the domestic companies so far this year, including Tata Tea's acquisition of a 30 per cent stake in US-based Energy Brands for $677 million last week, have been executed through the PE route.
Tata Tea purchased stake in Energy Brands from US-based PE firm TSG Consumer Partners; Dr Reddy's acquired German generic drugmaker Betapharm from 3i, Suzlon Energy acquired Hansen Transmissions from Allianz Capital Partners and Ranbaxy acquired Terapia from buyout PE firm Advent International.
In addition, VSNL had acquired stake in Teleglobe from US-based PE firm Cerebrus late in 2005, while United Phosphorus took over Advanta Netherlands from another US-based PE investor Fox Paine Capital.