Apax Partners buys 20.37% stake in Shriram City Union Finance; TPG Capital exits

Private equity major Apax Partners LLP has picked up a 20.37 per cent stake in Shriram City Union Finance, the retail lending arm of Chennai-based Shriram Group, via secondary market transaction, as per a stock market disclosure.

The PE firm has bought 13 million equity shares, constituting to 20.37 per cent stake, through its subsidiary Dynasty Acquisition (FPI) Ltd, from TPG Capital. With the stake sale, TPG Capital has completed exited the company.

TPG had originally picked the stake in Shriram City in August 2013, which followed the amalgamation of Shriram Enterprise Holdings Pvt Ltd with Shriram Retail Holdings Pvt Ltd and the subsequent merger of the consolidated entity with Shriram City Union Finance Ltd. The deal was valued at Rs 1,207.29 crore (about $180 million).

The financial details of the latest deal have not been disclosed by Shriram City Union. However, given the current share price of Shriram City Union, TPG Capital pocketed somewhere around Rs 2,300 crore (approximately $357 million).

In May 2013, TPG Capital had exited another Shriram group company Shriram Transport Finance Company Ltd by selling its 10.07 per cent stake in the company to Ajay Piramal-controlled Piramal Enterprises Ltd for about Rs 1,652 crore (then $307 million), making multi-bagger returns in the process. This round of sale came after TPG sold 9.99 per cent stake in February 2013 for Rs 1,620 crore. The buyout specialist made a total of around Rs 3,272 crore (then $608 million) from its investment, an expected 6x-7x returns on the exit.

Privately held Shriram Capital is the holding company for Shriram group’s various financial services units, including Shriram Transport Finance and Shriram City Union Finance besides the two insurance ventures.

Last year, Piramal Enterprises bought around 10 per cent stake in Shriram City Union Finance for Rs 789.58 crore.

For Apax Partners, this is the first investment in the current calendar year and its second bet in the financial services space. In July, last year, Apax had picked about 8 per cent stake in Cholamandalam Investment and Finance Co Ltd by subscribing to its convertible preference shares (CCPS) of Rs100 each for close to Rs 500 crore.

Scrip of Shriram City Union was quoting at Rs 1730.95 in early morning trading, up 0.69 per cent in a strong Mumbai market on Wednesday.

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