Emerald Sri Lanka Fund I (Emerald Fund) provides equity financing for fast growing, small to medium sized (SME) Sri Lankan companies led by strong entrepreneurs & management teams.

STRATEGY SUMMARY & TERMS

  • Emerald Fund seeks to invest in fast growing Small and Medium Enterprises (SMEs) in Sri Lanka, that are led by promising entrepreneurs and strong management teams
  • The Fund focuses on emerging businesses with significant scope for growth comprising of revenue growth and margin expansion
  • The emphasis is on value addition subsequent to the Fund’s investment. Areas of value addition include strategic planning, governance, management development, financial management and operational efficiencies

TARGETED BUSINESS SECTORS & DEAL SOURCES

  • Target sectors for the Fund include healthcare, financial services, value added exports, leisure/entertainment, IT, logistics/port related services, consumer goods, infrastructure and construction
  • The Fund also targets export oriented sectors where Sri Lankan businesses enjoy natural competitive advantage due to factors such as access to raw materials, low operating-cost structure, attractive geographical location and highly experienced workforce
  • The team sources potential deals via proprietary research, intermediaries and the team’s networks

THE SRI LANKAN OPPORTUNITY

Since the end of its civil war in 2009, Sri Lanka has enjoyed stability, an increase in its rate of economic growth, and surge in investments in infrastructure by the government and by foreign investors. Sri Lanka’s GDP growth was over 8% in each of 2010 and 2011, 6.5% in 2012, and 7.3% in 2013 and estimated to be 7 % in 2014. Presently, Sri Lanka possesses the necessary conditions for sustained economic growth such as social and political stability, business friendly policies and attractive demographics with medium to long-term GDP growth projections are in the range of 7-8%. Sri Lanka’s continued growth will be propelled by strong investment in infrastructure; a young, well educated and hard-working population; moderate labor costs; and rapidly growing consumer demand due to increasing levels of disposable income. According to a McKinsey study, an estimated USD 80 to 90 billion of private investment, in both equity and debt capital, will be needed over the next 10 years to achieve a 6% to 7% GDP growth rate. It is difficult to fulfill this need through traditional funding methods such as bank borrowings due to their insistence on collateral and lack of credit appetite for some of the sectors. Further, very few equity options exists for companies until an IPO. Many companies in the target market are not IPO ready, due to their smaller size and lack of systems and governance procedures. Therefore, a huge opportunity exist in the market, for NDB Zephyr to invest in these high growth companies, improve them and exit profitably.

Thomas Barry, Founder and CEO of Zephyr Management stated

“We are excited about our participation in the first institutional private equity fund in Sri Lanka. NDB’s strong reputation and experience in the Sri Lanka capital markets will provide the Fund’s investment team with much needed local experience, knowledge and relationships.”

Investment Thesis & Strategy

NDB Zephyr Partners Limited (NDB Zephyr), launched the Emerald Fund to benefit from the untapped opportunity for growth capital in unlisted, entrepreneurially-led Small and Medium sized Enterprises in Sri Lanka.

Sri Lanka has a large number of small and medium sized businesses that are in need of expansion capital to benefit from strong economic fundamentals (i.e., strong GDP growth, growing domestic demand, etc.) and the improved operating environment in Sri Lanka today. The fund has already attracted commitments of USD 42.5 million from NDB Capital Holdings PLC, IFC, DEG, FMO, Zephyr and Dorset Limited.

NDB Zephyr’s investment philosophy will involve active participation in the management of investee companies to improve development and execution of company’s strategy and to generate superior returns through successful exits. To NDB Zephyr’s knowledge, the Fund will be the first private equity fund dedicated to Sri Lanka.

An important part of the Emerald Fund’s strategy is to secure significant rights in shareholder agreements (e.g., budgetary oversight, approval of appointments to key positions, ability to force an exit, etc.) and board representation. The investment team will actively monitor portfolio companies to help them implement their growth strategies. At least one member of the Emerald Investment Team typically will serve on the board of a portfolio company. Post-investment, the Manager expects to work actively with the management of its portfolio companies to enhance financial and organizational structures, business strategies and implement professional governance practices. Divestment is expected via strategic sale or a stock market listing on the Indian stock markets three to five years after investment.

Zephyr will assist its portfolio companies via active participation in areas such as strategic planning, management development, financial management and corporate governance, and operational efficiencies.

The Partners

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Zephyr Management, L.P. is a global private equity and marketable securities firm. Founded in 1994, the firm specializes in the creation and management of highly focused and value added investment funds. Since its founding, Zephyr has sponsored twenty two investment funds across the developed and developing world and is actively researching new investment opportunities around the world.

Visit Zephyr’s website: www.zmlp.com

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NDB Capital Group holds a complementary business portfolio of fee-based investment banking, wealth management and stock broking, and fund-based activities such as proprietary debt and equity trading and underwriting.  NDB Capital’s fee-based investment banking and wealth management businesses are market leaders in Sri Lanka.  NDB Capital is a subsidiary of National Development Bank PLC.

Link to NDB website: www.ndbch.com

Emerald Sri Lanka Fund

NDB Zephyr Partners Lanka (Pvt) Limited
97, Dharmapala Mawatha
Colombo 7, Sri Lanka

Tel:  +9411 2303810 | Fax: +9411 2303811

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