New York-based emerging market PE firm Zephyr charts $ 50 m Sri Lanka plan

The fund, called Emerald Sri Lanka Fund, in tie up with NDB Capital will be managed by a team based out of Colombo and Bangalore

MUMBAI: New York based emerging market private equity (PE) firm Zephyr Management is raising a $ 50-million fund focused on Sri Lanka, as investor interest increases in the island nation that is returning to business after a three-decade long civil war.
The fund, called Emerald Sri Lanka Fund, will be managed by a team based out of Colombo and Bangalore.

Zephyr, which has so far raised $ 1.3 billion for investments in emerging markets, has formed a joint venture with investment bank NDB Capital, a subsidiary of Sri Lanka’s National Development Bank. It will be the first private equity fund dedicated solely for investments in Sri Lanka. “We think that Sri Lanka is exciting as there is a lot of economic growth after the civil war,” said Mukul Gulati, who set up Zephyr’s India office in Bangalore. “It is like India a decade ago, when bank funding was limited and dynamic young businesses didn’t have access to equity capital outside friends and families.”

The new fund, which will be managed by a joint entity NDB Zephyr Partners, hopes to raise about $ 10 million of the corpus from International Finance Corporation (IFC). It is also in talks with other development finance institutions and family offices, with fundraising expected to close by September.
The fund will also seek opportunities in the Indian market for its portfolio companies using Zephyr’s network in India built over the last seven years including investments in drug developer Aizant and third party distributor of financial products NetAmbit.

Sri Lanka’s economy grew at annual growth of 6.4% in the last decade, with the service sector accounting for about 60% of the country’s economy according to the World Bank. The Sri Lankan Government has also invested in infrastructure and the investment promotion agency offers quick and transparent transactions.

“They have a single-window clearance of investment, making the process seamless,” said Sundi Natarajan, founding partner at Kyron India Accelerator, who has invested in Sri Lankan startups through the Indian Angel Network.

Emerald Sri Lanka Fund has two Managing Directors, NDB Capital’s Senaka Kakiriwaragodage and Zephyr’s Karthik Bhat. It will look to invest around $ 2-6 million for significant minority stakes in export oriented sectors like agricultural products and high-value textiles besides companies targeting domestic market for FMCG, education and healthcare. (Economic Times)

http://www.ft.lk/2014/04/16/new-york-based-emerging-market-pe-firm-zephyr-charts-50-m-sri-lanka-plan/