Axis Private Equity is looking to part-exit while ad-for-equity media investor HT Media is offloading its entire holding in the Gujarat-based hospitality firm Neesa Leisure Ltd (operating under the brand Cambay) through initial public offfering.

Neesa is in the business of owning, operating and managing hotels & resorts, as well as providing club & vacation ownership services and hospitality education. It is looking to raise Rs 200 crore through a fresh issue, besides the offer for sale by existing investors.

Axis PE invested Rs 75 crore through a mix of direct equity investment and compulsorily convertible preference shares three years ago. It is now looking to encash Rs 50 crore through a part sale of shares. HT Media invested around Rs 1.8 crore in July, 2009, and will tender all shares during the IPO.

The last equity issue of Neesa was at a price of Rs 195 where the promoters picked more shares in December, 2010. If this is taken as a benchmark for the issue, HT Media will exit with a modest 12.4 per cent return from the two-year-old investment. This will only partly compensate the media firm that brings out the English daily

The Hindustan Times and business paper Mint, among other publications, for the unrealised loss in another firm that it backed but didn’t encash when the price was high. HT Media is sitting on an estimated 10 per cent unrealised loss on its two-and-half-year-old Rs 5 crore investment in Aqua Logistics.

Axis PE had originally picked shares at Rs 101 a piece in March, 2008. Although the price at which the preference shares will be converted into shares are not known, the agreement involves Axis PE being ensured about 22 per cent IRR since the preference shares were allotted (August, 2008). From a first-in-first-out principle, Axis PE will be making 93 per cent return on its three-year-old investment.

However, others may not be so lucky. Neesa also has a string of other investors including two other ad-for-equity media investors – Dainik Bhaskar Group’s Writers & Publishers and Bennett Coleman & Co Ltd’s Brand Equities Treaties Ltd (Rs 6.6 crore). Plus, IFCI is on board through compulsorily convertible preference shares.

Writers & Publishers apparently acquired a stake in the company at the peak valuations of Rs 217 per share in October, 2008, and maybe under water at the time of the issue.

Brand Equities Treaties fared better, having invested in December, 2009, at Rs 185.32 per share. IFCI is yet to convert the preference shares worth Rs 26 crore that it subscribed to partly, in lieu of Rs 15 crore term loan granted to the company. But IFCI’s agreement ensures it 20 per cent IRR.

Neesa intends to use Rs 132 crore or majority of the net proceeds of the issue to develop new properties in Lucknow, Raipur and Nasik. It also plans to repay the debt of the Axis Bank-led consortium worth Rs 30 crore, besides paying back some money to L&T Infrastructure Finance Co.

If the issue price is, indeed, around Rs 195 per share, it will translate into around 33 per cent equity dilution (not counting in preference shares), which will value the company at around Rs 600 crore.

For the year ended March, 2010, the company had total revenues of Rs 106 crore with net profit of Rs 12 crore and for the six months ended September, 2010, it had a total income of Rs 70 crore with net profit of Rs 7.8 crore. At Rs 600 crore, it can be asking for an earnings multiple of around 38 times trailing the net profit. This is just a tad higher than a company like Mahindra Holidays & Resorts that also has hotels and resorts and offers vacation ownership services.

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