ChrysCapital has sold around half of its 9% holding in Bajaj Auto Finance in the open market for around Rs 112 crore ($24 million). The private equity firm had put in the big chunk of money ($10 million at Rs 450 a share) in February 2006 to acquire over 5% stake in the auto finance company through a preferential allotment.
The PE firm is also believed to have participated in a rights issue few months later at a lower price of Rs 325 that would have brought down its average cost of acquisition. Its stake went up to 9% by September’07 as per shareholding disclosures.
The part exit by ChrysCap comes at a time when Bajaj Group is looking to enter infrastructure finance business through Bajaj Auto Finance, that has till now been a retail finance firm.
At the price at which it picked the maximum number of shares (around 5% stake in February’06) over four and half years ago translates into a returns of a little over 50%. Although this may appear modest compared with other multibaggers of the PE firm, it is reasonable given that consumer finance was among the worst hit by the financial crisis two years ago.
Many large lenders including top banks as such ICICI Bank besides NBFCs such as GE Capital had significantly pruned their operations. Auto finance in particular was hit hard as poor consumer sentiments and job losses had affected sales of automobiles, considered a discretionary expenditure. Bajaj Auto Finance has benefited from this exit of larger lenders.
Bajaj Auto Finance derives a significant proportion of its lending to non auto finance segments. For the year ended March’10, it deployed less than 30% of funds for two and three wheeler financing. Mortgage & other secured assets besides consumer durable financing together accounted for a little less than half of its deployment with the rest going to small business and personal loans.
Incidentally ChrysCap had also invested in Mahindra & Mahindra Financial Services, that is into financing of M&M’s tractors, cars and other vehicles. ChrysCap over a period has raised its stake in that firm and, as of June 30, held close to 10% in M&M Financial Services through two separate entities.