Why FARALLON is bullish on Indiabulls

February 10, 2004 Farallon Capital buys 3 percent equity of Indiabulls for Rs 7.11 crore. This could not make headlines then, very few people could read between the lines and picked the clue "why third largest hedge Fund in the world is interested in investing an Indian company with market capitalisation less than a billion dollars". Since then slowly, gradually Farallon Capital Management LLC alongwith its two investment arms FIM and Oberon has pumped in crores in Indiabulls group of companies. Again on June 18, 2006 Farallon makes a big buy, Oberon(a special purpose vehicle owned by Farallon) buys preference shares up to Rs 644 crores.
Bringing pieces together, India's leading Business Magazine "Business Today" publishes a very well knitted article on bonding between Farallon and Indiabulls group, why a hedge fund sees long term prospects for fledgling firm, in its July 16, 2006 issue.

Reproducing it here "Why Farallon likes Indiabulls?"

"FARALLON CAPITAL MANAGEMENT LLC is the third largest hedge fund in the word, managing the assets worth $ 17.5 billion (80500 crore). Since February 2004, the firm that’s earned a reputation for managing fund of college endowments and educational functional foundations has been particularly bullish on India. Actually make that Indiabulls, a fledgling financial service group with interests in broking and real estate, with a turnover of Rs. 211crore, net profit of Rs. 74 crore ,and which got listed on the Indian exchanges in September 2004. Since February 2004, when Farallon entered Indiabulls via a pre- IPO placement, it has along with its associates like FIM (a Mauritius based investment arm of Farallon) and Oberon (a special purpose vehicle owned by Farallon) have invested over Rs. 1000 crore in various Indiabulls firms (six at last count). The biggest investment came last fortnight when Oberon bought preference shares worth Rs. 644 crore in Indiabulls financial services (IFSL).

Promoted by three IITians- Sameer Gehlaut, Rajiv Rattan and Saurabh Mittal- Indiabulls is in a business dominated by established universal banks, traditional broking houses and foreign companies. So, why is a San Francisco-headquartered hedge fund betting big capitalization of less then a billion dollars? Promoted by one Tom Steyer, Farallon is registered as an investment advisor with the Securities Exchange Commission (SEC) in the US. It manages equity capital for institutions and high net worth individuals, and has investments in distress assets, starts-ups and real estate. And, of course, in Indiabulls. Two individuals of Indian origin – Rajiv Pant and Ashish Pant-sit on Farallon’s investment committee, which takes the decisions on investment allocations.

FARALLON’S INDIAN FLAVOUR The fund and its associates have invested eight times in Indiabulls in the past two years.
ACQUISITION DATE	INDIABULLS COMPANY	ACQUIRER
Feb. 10, 2004	Indiabulls financial Services	Farallon Capital buys 3 percent equity for Rs.7.11 crore
Jan. 3, 2004	Indiabulls Credit services	Farallon Capital buys 33.3 percent equity for Rs. 88 crore
Oct. 21, 2005	Indiabulls Real Estate	FIM Ltd. Acquires 60 percent for Rs. 5.1 crore
Jan. 14, 2006	Indiabulls Housing Finance	Farallon Capital announces investment of Rs. 112 crore in its equity capital
Jan. 14, 2006	Indiabulls Credit services	Farallon announces investment of Rs.89 crore as a follow-on equity
Feb. 16, 2006	Indiabulls Infrastructure	FIM Ltd. buys 60 percent equity for Rs. 15 crore
June 3, 2006	Indiabulls Buildcom	FIM Ltd. buys 36 percent equity for Rs. 15 crore
June 18, 2006	Indiabulls financial Services	Oberon Ltd. buys preference shares up to Rs. 644 crore
FIM and Oberon are investment arms of Farallon Capital Management LLC Source: company

“We approached Farallon for investment in our company way back in early 2000 and since then the relationship has only grown stronger and stronger,” explains Gagan Banga, Director,IFSL. But what market watchers find a bit strange in Farallon’s rather long-term commitment to Indiabulls. After all, hedge funds are globally known for playing the arbitrage game in different markets, and aren’t exactly known for holding on to stock for too long. Concedes Banga: “Though hedge funds are known for getting in and out pretty fast they hav stayed put in Indiabulls.” Then, as a primary market expert asks: “How come one of the biggest hedge funds in the world is interested only in Indiabulls, and in no other Indian stock?” You could argue that Farallon saw potential in Indiabulls. And that faith has translated in to returns. At today’s prices, Farallon’s close to 2 percent holding in IFSL has appreciated a little over 10 fold from Rs. 7.12 crore to Rs. 73.24 crore. Doubtless Farallon-Indiabulls is a win-win proposition. So far. "