- Experienced management team and synergies with parent
Provincial Finance & Lease Company Private Limited (PFPL) is the non-deposit, systemically important NBFC arm of Alpha Alternatives Holdings Private Limited. PFPL was acquired by Alpha Alternatives in 2019. PFPL is not primarily involved in lending activities and is majorly engaged in investing funds raised from investors via PP-MLD issue, the investments would be managed by fund managers from Alpha Alternatives and would follow similar investing strategies as currently adopted in the parent. While the investment strategy for the previous issues under PFPL were focused on equity and equity backed derivatives, the current issue will be focused on commodity backed derivatives.
The holding company Alpha Alternatives is promoted by Mr. Naresh Kothari (Founder & Managing Partner) and is led by him and his team of experienced professionals. Mr. Naresh is a seasoned financial services professional with over two decades of experience in business building and capital markets. Prior to Alpha Alternatives, Mr. Naresh was one of the earliest Senior Partners at Edelweiss Financial Services. He has previously led teams for Equity Capital Markets business and also a leading Alternative Asset Management platform. Alpha Alternatives have shown growth in their AUM which grew to Rs. 3,502 Cr. as on March 31, 2022 from Rs. 1,182 Cr. as on March 31, 2020. These assets are managed through various strategies based on Arbitrage (incl. commodities), Absolute Return and Equity based and Structured Credit.
The holding company is planning to raise funds via PPMLD issuance in the NBFC which would further add to the growth of AUM on a consolidated basis. The proceeds from the issue will be invested through the Alpha Alternatives’s Equity Absolute Return (EQAR) strategy and Commodities Absolute Return (CAR) strategy. Both these strategies currently have an AUM of Rs. 1,318 Cr. and Rs. 110 Cr. respectively as on June 30, 2022. Apart from strategic and risk management synergies with the parent, PFPL would also benefit from the capital support from Alpha Alternatives. The holding company has committed an overall capital infusion of around Rs. 150.00 Cr. in PFPL and would be supporting the company for any future requirements.
- Susceptibility to uncertainties inherent in the capital markets
The company's operating performance is linked to the capital markets, which are inherently volatile as they are driven by economic and political factors as well as investor sentiments. All the proceeds from the PP-MLD issue will be invested in capital markets and derivatives. Also, the coupon payments in the form of returns are also highly dependent on the performance of the underlying securities and derivatives invested. Though investments in equity and commodity backed derivatives will be via liquid securities, the company and investments shall be exposed to gap down risk, and other market and liquidity risks.
Alpha Alternatives’s track record of operating business at NBFC level is limited. The management plans to leverage PFPL around 5-6 times and would require capital support from the parent company Alpha Alternatives for its future growth plans. Going forward, the ability of the company to profitably manage and scale up the AUM would be key credit monitorable.