Ascent Capital (formerly UTI Ventures) has made a part-exit from its four-year-old investment in apparel retailer Koutons Retail by selling a third of its 8.3% holding apparently at a 58% haircut. This follows a pretty volatile trading history of the company since it listed three years ago and more than doubled to cross Rs 1,000 within months of debut but has since then crashed and is now trading at an all time low of around Rs 57 per share.
Ascent Capital’s Ascent India Fund has sold 2.8% stake generating Rs 6.86 crore over the last three weeks at average sale price of Rs 90-91 apiece compared to its average cost of purchase pegged at around Rs 213.5 per share. Ascent Capital had invested a total sum of Rs 54.6 crore through two rounds of investments in June 2006 and November 2006, a year ahead of its IPO.
Delhi-based Koutons Retail has been battered over the last few months after falling in line with the market since early 2008. This is partly attributed to large quantum of pledged shares of promoters some of which was sold off by lenders after the owners could not repay the loan, besides some dealers hammering down the stock by selling shares in a counter with low trading volumes.
As of September end, promoters holding was pegged at 59% half of which was pledged. The promoters owned 66.6% stake as of December 2007.
The stock received particular bashing late September after credit rating agency ICRA suspended its LB+/A4 ratings assigned to a Rs 300-crore fund based facility of the retailer as the agency was unable to carry out a rating surveillance. The firm has apparently also decided to sell its hospitality industry assets to retire debt of the mainstay retail business.
Although the company has reported double digit revenue growth for the last two years, profit growth has been less than spectacular.
Argonaut Ventures is another pre-IPO investor in Koutons Retail having put in around $10 million in November 2006, coinvesting with Ascent Capital. Post-IPO it held 5.65% stake with an average cost of purchase pegged at Rs 266 a piece.
Argonaut sold a sixth of its holding during July-September period when the price was hovering around Rs 170-350. This means Argonaut made a part exit at a price that could be close to par value in its almost four-year-old investment.
Another pre-IPO investor, Passport Capital has exited its investments over the last one year when the share price was hovering between Rs 300 and Rs 450. Incidentally, Passport Capital that had picked the shares at a price of Rs 350 a piece had bought more shares from the market the stock was trading around Rs 800-1,000 in first quarter of 2008 pushing up its cost of acquisition and is expected to have exited at a loss.