2i Capital has sold a quarter of its 6% stake in Pipavav Shipyard in the open market pocketing Rs 55 crore (at Rs 55/share). The cost of acquisition of shares for 2i Capital was Rs 25 a piece and the partial exit translates into 2.2x simple returns on the three-year-old investment.
2i Capital had invested a total of Rs 100 crore in two tranches through convertible bonds in September’06 (Rs 84 crore) and February’07 (Rs 16 crore). The bonds were converted into 40 million shares in October 2007 which gave it 6.89% equity stake (pre-IPO). The issue which raised Rs 478 crore ($100 million) last September brought down 2i Capital’s holding to 6.01%.
Assuming that 2i Capital sold the stock on FIFO basis, the IRR works out to something close to 27% (without taking into consideration the interest paid on the convertible bonds) and 29.45% (after taking into account interest received).
Pipavav Shipyard has been one of the many new public issues where the stock price hardly managed to hold on to the issue price. Although it hit an intra-day high of Rs 64 on its debut on October 9, 2009, the stock has been mostly trading below the issue price of Rs 58 ever since.
Promoted by SKIL Infrastructure Ltd and Punj Lloyd Ltd, Pipavav had a large group of institutional investors before it got listed including some PE firms. Other investors in Pipavav include Blackstone (portfolio investment arm), Merrill Lynch, Galleon, New York Life, Trinity, The India Fund among others.
Besides Pipavav Shipyard, 2i Capital’s portfolio counts names such as QAI India, Titagarh Wagons and Idea Cellular. Last July, Thomson Reuters acquired 2i Capital-backed Indlaw Communications Pvt. Ltd (a Delhi-based company that operates Indlaw.com, a popular legal and regulatory information source) for an undisclosed amount.
2i Capital had closed its first fund in 2003 at $200 million that was fully invested across some 17 companies, with manufacturing and engineering accounting for a little over third of the total followed by energy and infrastructure sector(over a quarter), with the rest in telecom & technology, consumer & capital goods, leisure, travel besides logistics & supply. Currently 2i Capital invests out of its second fund.