BNDES looks to PE funds, direct investment amid growth-company push
April 16, 2014
Brazil’s development bank will invest in up to 12 private equity companies and support Bovespa Mais trading, in a drive to facilitate capital markets access for the country’s smaller firms
BNDES, Brazil’s development bank, will inject BRL2 billion ($895 million) in up to 12 private equity and venture capital funds over the next two years, as part of a BRL3 billion program to support Brazilian companies accessing equity markets that was announced on Tuesday.
|| Source: BNDES
BNDES will choose the funds through four public tenders — a change from a previous strategy whereby the bank established the fund before bringing in third-party management. The first selection round will take place in the coming weeks, with asset managers pitching for the development bank to invest in their funds.
“BNDES will receive and analyze the proposals — we'll verify our priorities and the quality of the proposals to select the funds, not only the managers," Fernando Montese, manager in BNDES' venture capital and private equity division told LatinFinance.
The new approach is designed to maintain a diversification of investments, especially since 18 of BNDES' 34 private equity funds are due to mature in the next 3 to 4 years, Montese added.
BNDES will focus on its priority areas — infrastructure, technology, education, healthcare and creative industries, and funds of funds — when it comes to selecting investment vehicles. It expects its BRL2 billion to be complemented by some BRL6 billion of cash from other investors.
"With all these measures, we are looking to generate BRL10 billion in new investments, this will have a very large impact in the market," Montese said, referring also to another BRL1 billion the bank has set aside to help companies list.
Bovespa Mais boost
Companies that are already trading on Brazil’s small-cap index, the Bovespa Mais are also set for BNDES help. The development bank has allocated BRL1 billion to take an anchor investor stake of up to 20% in companies launching IPOs.
So far, just nine companies are listed on the Bovespa Mais. The program comes as Brazil's regulators strive to ease the way for small companies to access the capital markets, and follows a survey of similar endeavors in other markets.
"When the company starts the roadshow, they can say to investors, in Brazil and abroad, that BNDES will be an investor of this specific public offer, limited to 20%," said Bruno Aranha, manager in BNDES' venture capital and private equity division. "We see a lot of transactions like that in Hong Kong, for example."
A dedicated fund — which will have up to BRL250m capital of which up to 30% will come from BNDES — will reinforce the same objectives, and will be able to trade in Bovespa Mais stocks to foment secondary market liquidity. LF