Eredene considers AIM delisting

The India-focused fund hopes to have divested all of its assets within the next two years.

Eredene Capital, a UK-based fund targeting investments in Indian infrastructure, is considering the cancellation of its listing on the Alternative Investment Market (AIM) at some future date, according to broker Numis Securities.

The company, which is currently in the process of implementing a cost-cutting programme and realising assets, thinks a delisting could help it further reduce operating costs and better achieve its divestment strategy.

Final results for the year ended 31 March 2013, released today, show the fund’s net asset value (NAV) decreasing to 11.3p per share from 13.3p as at 30 September 2013 and 18.52p as at 31 March 2013. The share price of 5.25p represents a 53.5 percent discount to the NAV at 31 March.

In July 2012, Eredene announced its intention to exit all its existing assets and said that it would make no further investments in new projects. It returned £15.3 million (€19.1 million; $25.6 million) of surplus capital to investors via a tender offer at 18p in August 2012, after which it sold its stake in port operator Ocean Sparkle in June 2013 for £8.2 million, allowing it to pocket a gross premium over investment cost of 39 percent in rupee terms. It then returned £20 million to shareholders via a tender offer, taking the total amount returned to investors to £35 million.

At the end of July, Eredene sold a 23 percent stake in Sattva CFS & Logistics for £1.9 million, allowing it to post a 4.6x return on its initial investment and an IRR of 24.5 percent. Eredene retains a 16 percent stake in the asset, and the fund’s remaining portfolio comprises eight investments.

The period also saw the firm pursue its cost-cutting efforts, reducing its operating expenses for the year to £2.4 million. Operating costs for the year to 31 March 2015 are expected to be close to £1 million.

Crucial to this programme was Eredene’s decision to outsource management of the company’s operations in the UK to Ocean Dial, a London-based asset manager focused on India. As part of the handover to Ocean Dial, Alastair King, chief executive and Gary Varley, chief financial officer, left Eredene on 31 December 2013 and 31 March 2014 respectively. Ranveer Sharma continues to lead Eredene’s investment advisory operations in India.

The company originally intended to raise a second, unlisted fund to succeed its current AIM-listed vehicle, with a target of $300 million. Yet the initiative failed to gain traction.

“If Fund II has not achieved a first closing by the end of October 2009 or within a reasonable period thereafter, the capital raised from the Placing will be invested directly by Eredene into Indian infrastructure projects,” a statement by the company, which could not be reached for comment before press time, said in August 2009.

Upon inception, Eredene’s first fund had about £100 million of capital to invest, according to Infrastructure Investor Research and Analytics.