Blackstone sells 7.4% stake in Gokaldas Exports at huge loss

Private equity giant Blackstone has sold another large chunk of shares in garment exporter Gokaldas Exports Ltd as it looks to gradually liquidate one of its loss-making investments in India.

The PE firm sold 7.4% stake in the company for Rs 29.2 crore ($4.4 million) on Wednesday. It sold shares at Rs 113.5 each or less than half the price at which it had invested in the firm.

Exchange data show ICICI Bank bought the shares.

This is the second large chunk of shares of Gokaldas Exports that Blackstone has offloaded in the past few weeks. Last month, Blackstone had sold just under 10% stake in the firm for Rs 43.5 crore ($6.5 million). That time too ICICI Bank had picked the shares.

Separate disclosures suggest ICICI Bank has been slowly selling the shares previously purchased from Blackstone at a loss.

With the latest share sale, Blackstone's holding in the company has fallen to 40%. This is currently worth Rs 154 crore.

Gokaldas Exports' scrip declined 2.12% to close the day at Rs 110.95 a share on the BSE in a strong Mumbai market.

Blackstone had previously part exited from Gokaldas Exports two years ago. It had initially sold 5.6% stake out of its 68.2% holding in June 2014 for Rs 16.19 crore. At that time, it had sold shares for Rs 83.9 a piece. Later that year, it sold another 4.5% stake for Rs 10.48 crore at Rs 67.65 each.

That time too, the shares were acquired by ICICI Bank.

The latest transaction marks the fourth part-exit for the PE giant from one of its private investment in public enterprise (PIPE) deals in the country.

Blackstone had invested in the company in 2007, just months before the stock market tanked, at Rs 275 a share.

It had bought a majority stake in the company for Rs 485.2 crore and later hiked its holding through an open offer.

The company was affected by the global slowdown as it was dependent on its exports business to the developed markets.

The firm's revenues remained almost flat at around Rs 1,100 crore in the last eight years with a small dip in between. It moved from net profit of Rs 47.8 crore in the year ended March 31, 2008 to net loss of Rs 132 crore in 2011-12. It came out of the red in 2014-15 after five straight years of loss.

For the year ended March 31, 2016, it clocked net sales of Rs 1,142.9 crore with a net profit of Rs 61.3 crore.

The firm almost halved its net debt last year and sought to consolidate its manufacturing operations besides implementing other cost cutting measures. It expects weak international demand to remain a challenge for the business.

For Blackstone that struck a bulge bracket deal early this year with an agreement to acquire up to 60.48% of Bangalore-headquartered IT services firm Mphasis Ltd from Hewlett Packard Enterprise for Rs 5,466 crore, this is the first exit activity from any Indian firm in 2016.

Last year, it sold its majority stake in CMS to Baring Private Equity Asia. Last year, it also part exited in the IPO of flavours and fragrance maker SH Kelkar & Co Pvt Ltd. Early last year, it had also sold stake in auto parts firm Agile Electric. All these were profitable exits for the PE firm.

While Blackstone had made some good investments in the private space, it had bet on some public listed firms such as Gokaldas Exports at the wrong time when stock market valuations were peaking out in India.

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