이 기사는 2019년 12월 20일 08:00 thebell 에 표출된 기사입니다.

South Korea’s mid-cap private equity firm Praxis Capital Partners is known for its boldness to bet on areas that other firms would rather shun. This explains why Praxis Capital is often called the First Penguin, fearless of trying out new things.

The seven-year old private equity firm has almost finished raising money for its third blind-pool fund. The firm has received investments from major domestic institutional investors – including Korea Post, Korea Growth Investment Corp and National Pension Service. With committed capital from LPs increasing, Praxis Capital has moved up its fundraising goal to 500 billion won ($430 million) from the original target of 400 billion won, the largest ever in the firm's history.

The firm has been in expansion mode, recently hiring Won Jong-woo, an investment expert in waste management and renewable energy sectors from Macquarie Group. It plans to hire a few more people early next year.

Since its inception, Praxis Capital – which seeks to invest in small to mid-sized companies with enterprise value between 50 billion to 200 billion won ($43 to 172 million) – has invested total 16 companies through seven funds, among which five were project-specific and two were blind-pool funds.

This year Praxis Capital exited its investment in E-Land Retail – a subsidiary of South Korean retail giant E-Land Group – which the firm acquired in 2017 in a consortium with other investment firms including Curious Partners. The exit generated more than 23 percent of an internal rate of return. The firm also made a partial exit from Hojeon Ltd., one of its portfolios in the apparel sector, selling roughly four percent stake in the company to lock in gains.

Two investments this year

Praxis Capital has made two investments this year. In August, it bought a controlling stake in BusinessOn Communication, Seoul-based e-tax invoice company, for 93 billion won ($80 million). The company has the largest market share in the domestic market, counting the country’s major conglomerates like Samsung Group and Hanwha Group as its clients.

As recently as this week, Praxis Capital has signed an agreement to acquire a controlling stake in secondhand e-commerce platform Bunjang.co.kr. The buyout transaction would mark the first deal made through its third blind-pool fund. In 2019, Bunjang is expected to record one trillion won ($858 million) in gross merchandise volume (GMV) and 12 billion won ($10 million) in revenue, up 60 percent year-on-year. The company's profitability also appears in good shape, with operating income margin set to exceed 20 percent this year.

In the coming year, Praxis Capital plans to make at least two exits from its portfolio companies. Its e-book platform RIDI Corporation is likely to start preparations for flotation with an aim of listing on the local bourse next year.

Also, denim brand PLAC, in which the private equity firm bought the entire stake in 2018 through a stalking horse bid process, has showed financial improvement, with its revenue expected to grow more than 20 percent this year. Although still making an operating loss, the company is highly likely to turn around next year.

Exit strategies on focus

There are also challenges, as the firm’s portfolios in food service and consumer goods sectors are struggling to make a profit.

Seafood buffet restaurant and wedding hall Todai Korea, in which Praxis Capital acquired a 48 percent stake in 2015, generated earnings before interest, taxes, depreciation and amortization (EBITDA) of only 6.2 billion won ($5.3 million) in 2018. Its operating loss, however, has continued to shrink. EBITDA is also expected to improve this year, thanks to an increase in cash flow from the company’s wedding hall business, industry sources said.

Cosmetic company ANCORS – in which the private equity firm invested 30 billion won ($25 million) last year in pre-IPO – is reportedly suffering from the slowdown in China, as the Chinese market accounts for a significant share of the company’s total revenue. However, with its Chinese manufacturing facility built in Shanghai starting production in July, revenue of ANCORS is expected to continue to grow in the coming years.

(By reporter Rho Ar-rum)