UNIFI Capital, a Chennai-based portfolio management company, has launched its latest fund, India Spin-off Fund.
Addressing presspersons here on Wednesday, K. Sarath Reddy, Managing Director and CIO, and G. Maran, Vice-President, said this open-ended fund would address investments into corporate spin-offs and demergers.
Spin-offs occur when a parent corporation distributes all or most of its holdings of stock in a subsidiary to the parent's shareholders based on the proportion to their holdings in the parent company. As a result, the subsidiary company is no longer owned or controlled by the parent company and there were two separate publicly traded companies.
Mr. Maran said “the market valuation of a combined company would always be lower than that of distinct businesses listed as separate entities. This valuation gap is called conglomerate discount. Such discounts range from 15 per cent to 50 per cent from company to company.
Mr. Maran said a spin-off would help remove such discounts and improve shareholders return. Spin-offs were triggered by corporate restructuring and UNIFI was seeing a growing interest among listed companies in using spin-offs to unlock value. Currently there were over 15 interesting transactions that the company would consider for investment, Mr. Maran said.
Mr. Sarath Reddy said the company was expecting to mobilise Rs.200 crore through this new fund. The fund would build a portfolio of ten companies, where the exposure to any chosen sector will usually not exceed 30 per cent.
