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OTP Bank unit to launch venture capital fund

New OTP banking group member PortfoLion will launch OTP's first venture capital fund in the framework of the European Union Jeremie program, Portfolion CEO Viktor Tóth announced on Wednesday. They plan to invest HUF 2.5 billion already this year.

The bank acquired 80% of the venture capital fund manager Portfolion just last Thursday.

The fund, OTP Kockázati Tőkealap I will have capital of HUF 6.8 billion, of which OTP Bank will subscribe HUF 3 billion, and the remaining HUF 3.8 billion will be in repayable EU funding, he said.

The venture capital fund will have a run of eight years, and will receive the HUF 6.8 billion funding committed as investment needs require, within the first four years.

Portfolion plans total outlays of HUF 5.5 billion from the fund, including HUF 2.5 billion this year.

The fund plans to offer a prime yield, in line with risks, to investors. The expected yield is 12.9% annually, Tóth said.

The fund plans to invest in businesses in the fields of IT, biotechnology, environment protection and renewable energy, food industry, car manufacturing supply fields as well as tourism and health care when making investment decisions.

The venture fund manager plans to invest on average HUF 150 million in innovative companies needing initial investment as well as in already existing companies needing capital to expand, both set up within the past 2 years. The investments in these two groups would preferably exceed HUF 50 million and could reach HUF 250 million in the case of biotechnology or renewable energy.

The third target group included businesses set up 2-5 years earlier which seek an investor to finance an increase in market share or entering a new field of activity. Here the upper limit for individual investments is €1.5 million.

The fund plans to have a minority stake of no less than 25% plus one share, and would take a majority stake as an exception.

They plan to keep the stakes acquired for five years on average, and they will decide on the way of exit already when making the investment

OTP Bank announced last Friday it had acquired a direct 80% stake in venture fund manager PortfoLion, which has registered capital of HUF 25 million, on February 25.

OTP Bank deputy CEO László Wolf said the registration of the acquisition by the company court is underway, and the bank acquired the stake through an equity raise. (MTI-ECONEWS)