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Bain Capital part exiting Hero MotoCorp with around 2x in three years

13 June, 2014

Private equity firm Bain Capital Partners is set to sell around half of its holding in Hero MotoCorp Ltd via book-building market transaction on Friday, as per a copy of the term sheet reviewed by VCCircle. 

The deal may allow the firm to encash its original investment, translating into a 2x return, including dividend earnings in its little over three-year-old investment. The PE firm is estimated to have generated around Rs 360 crore in dividend earnings from its holding in Hero MotoCorp in the last three years alone. 

The automaker has just declared dividend of Rs 65 a share, which would be worth Rs 110 more to Bain Capital based on its current holding and around Rs 55 crore provided it sells half of its shares before the record date of the dividend payout. 

Bain will be selling equity stake worth up to $393 million (Rs 2,328.5 crore) on Friday. It holds 8.6 per cent stake in Hero MotoCorp and will sell up to half of its shares, the term sheet stated. The size of the offering is $300 million with an option to sell up to $393 million. 

The PE firm is offering an indicative price band of Rs 2,582 to Rs 2,717 per share to offload its shares. The company’s shares last changed hands at Rs 2,708.55, up 0.12 per cent on BSE in a strong Mumbai market on Thursday. 

Bain is selling 85,70,514 shares or 4.29 per cent of the total outstanding share capital. Citi is the joint book runner of the proposed transaction. 

The PE firm had co-invested with Singapore’s sovereign wealth fund GIC three years ago to bankroll the Munjal family for buying out Honda Motor from their more-than-two-decade-old joint venture. The Munjals acquired the 26 per cent stake held by Honda Motor through their private holding arm Hero Investments Pvt Ltd (HIPL), financed through a loan, and then sold a minority stake in HIPL to Bain Capital and GIC to retire the debt.

Last year HIPL was merged with the listed company giving direct equity stake to the two investors and allowing them a free hand to exit the company as any public shareholder.

Although the exact quantum invested by the two financial investors was never made public it was believed to be anywhere between Rs 3,650 crore and Rs 4,500 crore. Bain had brought in around 70 per cent of this while GIC pitched in with the remaining amount. This means Bain invested between Rs 2,555 crore and Rs 3,150 crore to buy the stake. 

With the part exit, and factoring in the dividend earnings in between, Bain seems to be taking out the principal amount it wagered initially.

(Edited by Joby Puthuparampil Johnson)


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Bain Capital part exiting Hero MotoCorp with around 2x in three years

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