Singapore-headquartered Calamander Capital intends to raise between $100 million and $150 million for a Sri Lanka-focused private equity fund.
Approximately 25 percent of the Sri Lankan Private Equity Fund will be invested in rubber, 15 percent in tea, 15 percent in coconut, 10 percent in ceramic and the remaining 35 percent in trading companies and banks. The fund’s average deal size will be between $5 million and $10 million. It expects an internal rate of return of at least 30 percent, Roman Scott, a managing director at the firm, said in an interview.
Currently, the fund has $10 million in commitments and is targeting a first close on between $50 million and $75 million this October. It is targeting a final close in June 2010, according to Scott. The fund can borrow up to 30 percent of its capital, however it does not intend to be highly leveraged and will use debt primarily for the short term working capital of its investee companies, Scott stated.
Sri Lanka is the Cinderella of the Indian subcontinent.
The fund’s investors are primarily high net worth individuals and corporates based in Asia, particularly in India. “Sri Lanka is the Cinderella of the Indian subcontinent. Indian investors understand Sri Lanka is an economic extension of India and part of the Indian growth story,” noted Scott.
The world is seeing a lot of interest in soft commodities at the moment as insufficient supply points to a long term upward trend, according to Scott. The fund is a good way to tie opportunities in Sri Lanka to the global opportunity cycle. As the demand for soft commodities is global, the fund’s risk is also reduced, he pointed out.
Calamander Capital has identified more than $100 million-worth of investments over the last three years in Sri Lanka. “We were waiting for the end of the war to formally launch the fund,” said Scott. The Sri Lankan civil war ended this May when the Sri Lankan military defeated the Tamil Tigers, a separatist militant group.
While this fund is the first off-shore private equity fund dedicated to Sri Lanka, according to Scott, there have been investments made by private equity funds in the island state. In August 2008, emerging markets specialist Aureos Capital acquired a 25 percent stake in Sri Lankan conglomerate Sunshine Group for $4.75 million.