Private equity giant Carlyle has raised its exposure to brokerage and financial services firm India Infoline (IIFL) to 9 per cent through secondary market purchase of equity shares. Carlyle becomes a key institutional shareholder in IIFL and will be invited to join its board of directors to support its future developments, the company said on Wednesday without disclosing the acquisition cost.
VCCircle first reported on September 20 that Carlyle had built an exposure in IIFL and its holding to 6.7 per cent through open market purchases.
As per our estimates, the PE giant has invested around Rs 200 crore this year to buy shares of the Mumbai-based firm.
The investment was made by Carlyle Mauritius Investment Advisors Ltd, a part of Carlyle Asia Partners (CAP), one of the largest private equity investors in Asia since 1998. CAP has five major investments in the financial services industry in the region, encompassing banking, insurance and housing finance businesses, including HDFC in India.
Nirmal Jain, chairman of IIFL, said, “Carlyle has made a number of successful investments in financial institutions and has always shown a long-term orientation. We hope to leverage our relationship with Carlyle to continuously grow and expand internationally.”
“We look forward to supporting the company’s growth plans including expansion of their financing and international businesses. We remain committed to investing in India,” said Devinjit Singh, Managing Director of The Carlyle Group.
India Infoline scrip rose 1.95 per cent to close at Rs 70.75 a share on the BSE in a weak Mumbai market on Wednesday. India Infoline was trading close to its 52-week low after hitting a one-year high of Rs 129 a share last October. Shareholding disclosures revealed that Carlyle took an exposure into India Infoline between April and June this year when the share price was hovering between Rs 66 and Rs 80 per unit. It also bought more shares since then.
Besides its presence in retail and institutional brokerage, India Infoline also operates subsidiaries engaged in credit & finance, wealth management and global advisory services. It recently started its domestic asset management business with the launch of IIFL Mutual Fund.
The deal comes at an interesting time when financial services firms have been re-rated downwards, given poor stock market sentiments. It is one of the rare PE deals in recent times in the brokerage space, although there have been a few investments in the financial services business, such as L&T Finance Holdings and Magma Fincorp.
Carlyle, which is looking to go public in the US, appears to be digging for gold in a company which has, in the past, disappointed some other PE firms.
Two years ago, Singapore-based billionaire Richard Chandler-led investment firm Orient Global had exited its one-and-a-half-year-old investment in India Infoline with an estimated haircut of over 50 per cent. But to be fair, Orient Global had invested in India Infoline at the peak of the bull market and at the end of March 2008, held over 11 per cent stake through two funds – Orient Global Tamarind Fund Pte and Orient Global Cinnamon Capital Ltd.
Orient Global had picked the stake through a preferential allotment in early 2008 after striking the deal in November 2007. It had invested Rs 550 crore in a deal that valued the firm at Rs 8,564 crore and bought in more shares to bring down the average cost of purchase by investing around Rs 300 crore more. India Infoline currently has a market cap of Rs 2,135 crore.
This transaction was part of a multiple deal where Orient Global also picked minority stakes in two other businesses of India Infoline – namely, insurance broking and consumer finance subsidiaries. Last year, Orient Global Tamarind also exited these investments at a loss.
India Infoline also counts among its shareholders academic and veteran value investor Shivanand Mankekar. Incidentally, Mankekar also bought more shares of the company early this year. His stake had more than doubled, from 1.1 per cent as of March 31, 2011, to 2.26 per cent as of June 30.