“A term sheet has been signed between both the parties so far, which is a part of the due diligence process,” a source told Moneycontrol. Kolkata-based SREI Group is said to have initiated acquiring the asset management business of Essel Group — Essel Asset Management, sources told Moneycontrol. “A term sheet has been signed between both the parties so far, which is a part of the due diligence process,” the source said.
A term sheet is a bulleted list prepared by any of the proposing parties enumerating some of a contemplated business agreement’s features, terms, and conditions. However, signing a term sheet does not constitute a definitive agreement and does not mean the acquisition is final. The terms and conditions contained in the term sheet are not binding on any of the parties. They are subject to modification through further negotiations before the final agreement is prepared and signed.
The assets under the management of Essel Mutual Fund currently stand at Rs 1,428 crore. If the market grapevine is believed, the deal is likely to be done close to Rs 93 crore. In 2016, Essel Finance Wealth Zone Private Ltd (EFWZ), a wholly-owned subsidiary of Essel Finance Management LLP, acquired the entire shareholding of Essel Finance AMC, formerly Peerless Funds Management Company, and Essel MF Trustee Limited, formerly Peerless Trust Management Company. In response to Moneycontrol’s query, a Srei Mutual Fund Asset Management Private Limited spokesperson said: “We do not comment on market speculations.”
DOES SREI HAVE DEEP POCKETS?
SREI Group offers many services in the infrastructure and capital markets space. Project finance, advisory, and equipment finance are crucial service offerings within the infrastructure domain.
Besides managing alternative investment funds (AIFs), the conglomerate also invests in investment banking (for capital markets) and insurance broking (for corporations and individuals). The proposed acquisition of Essel Mutual Fund would complement Srei’s segments under financial services.
Srei Infrastructure Finance, the listed flagship entity of the SREI Group, had net debt (total borrowings minus cash and bank balance) of Rs 28,105.19 crore as of 30th September 2018.
Considering this massive debt pile-up, it remains to be seen if SREI will leverage its balance sheet further, notwithstanding the miniscule transaction size (Rs 93 crore).
WHY IS ESSEL MF UP FOR SALE?
According to media reports, Essel Group, led by Subhash Chandra, is planning to monetize its non-media businesses amid concerns over debt repayment to its lenders. The company plans to monetize about Rs 20,000 crore in six months by selling its infrastructure assets. Currently, at the group level, Essel has a total debt of Rs 17,174 crore, of which Rs 11,466 crore is infra-related debt. This infra-related debt covers three major verticals: power transmission, solar, and roads (toll and annuity). The promoters had pledged their 59 percent stake in Zee Entertainment to raise money that served as equity funding in their infrastructure-related businesses.
