Five minutes with Ayaz Motiwala

Samena Capital’s second special situations Asia fund is targeting $700m and so far has $400m in commitments. In the wake of its first close, vice president Ayaz Motiwala spoke to PE Asia about Samena’s hybrid private equity-PIPE strategy and the special situation opportunities it sees in the region.

Please provide an overview of Samena’s funds and focus in Asia.

In the special situations category we have two funds. Fund l is closed and Fund ll has had a first close. It is still open and will take in money until June 2013. 

Fund l has a vintage of June 2009 and it was a hard close because the markets were in bad shape at the time. 

Both our Middle East and Hong Kong offices focus on India as one of the centres where we have a larger proportion of our Fund l invested. We also look at Southeast Asia, most specifically the ASEAN markets. 

The mandate of Fund l is to invest in special situations where we can do public, private, credit and equity [investments], so it is a nice, wide mandate.

The mandate for Fund ll is the same, with an increased focus on mid-market special situation companies. As we looked at the market, we saw there was a massive dislocation. The listed markets were very cheap compared to private [markets]. The thinking was then that it would make a lot more sense to buy these high-quality listed companies and become the largest minority shareholder.

Which countries stand out as having the most investment opportunities?

If you look at countries like Indonesia, Thailand, Malaysia, the Philippines, they have had a dream run from the 2009 recovery. Each of them had reasonably clear mandates in elections, the macroeconomic environment has been good and despite very apparent problems in Europe for the last year and a half, these countries – especially Indonesia and the Philippines – have actually had GDP growth higher than they did during the euphoric times of 2005-06.

In Indonesia there are just under 450 stocks listed – so that universe is not too large compared to India, which has nearly 2000 stocks trading. That being said, Indonesia has a reasonable amount of width in terms of the range of listed companies. It is not a pure coal and banking story as some people perceive it to be. Coal, banking, telecoms and even some real estate opportunities have been appropriately valued with a relevant discount, because of the risk perspective, at around a 10 to 20 percent of their [counterparts] in Hong Kong or Singapore.

What has been interesting in the last few years is that the mid-market in Indonesia has offered a lot more opportunities. This is because the only form of risk capital in countries like Indonesia and Thailand has been the capital markets. The classic public market participants have not been appropriately valuing these companies and not participating. So Samena Capita, a hybrid fund, can come in a capture some of these opportunities.

What type of special situations are you seeing in India in light of the distressed macroeconomic environment?

The Indian market has traded differently to how it traded in 2008. In 2008, stocks in good businesses and bad businesses went down together. Now in 2011-2012, this crisis of confidence in lack of policy and macroeconomic distress has played-out in a very different way.

There is a two-track market. That dichotomy is very visible right now. [Investors] have veered toward the high-quality players [that are trading well]. But that presents an opportunity for players like us – this is the nature of special situations – maybe there are some diamonds in the rough on the other side where the market is trading [badly].

Our skill would hopefully lie in being able to do either public or private transactions, and being able to do PIPE transactions in such companies.