Private equity firm ChrysCapital has sold close to four-fifth of its 8.17% stake in auto component firm Amtek India with an estimated haircut of around 20%. This comes close on the heels of a similar part exit by another PE firm, Warburg Pincus, which sold over half of its 7.45% stake in the firm with an estimated 63% loss.
The difference in returns could be traced to the timing of the investment. Although ChrysCapital will not be proud of this two-year-old investment, it can still say that it did not make the mistake of punting on the stock at the peak of the market like Warburg Pincus, which bought the bulk of its stake in the fourth quarter of 2007 just weeks before the markets took a downhill track.
ChrysCapital invested in mid-2008 through open market purchases and picked close to 10% stake by end September’08. The bulk of its purchases are likely to have taken place when the share price hovered between Rs 60 and Rs 100. If Rs 80 is used as a proxy for its average cost of acquisition, it has sold a large chunk of shares with around 20% haircut. It sold as much as 8.5 million shares at Rs 64.5 per share on Monday, earning Rs 54.8 crore ($12.2 million).
The part exits by ChrysCapital and Warburg Pincus come months after the Delhi-based automotive component group’s flagship group firm Amtek Auto acquired 26.3% stake in Amtek India from the promoters in a deal worth Rs 215 crore as a part of consolidation of business under one firm. Amtek Auto bought 26.3% stake in Amtek India at an average price of Rs 64.8 a share.
The transaction was part of an agreement where Amtek Auto is to buy 40.2% stake owned by the promoters in Amtek India at a price not exceeding Rs 68 a share. A mandatory open offer to buy an additional 20% stake or 2.5 crore shares of Amtek India is pending. This is expected to give Amtek Auto majority holding of Amtek India and thereby consolidate its financial numbers.
Incidentally, both ChrysCapital and Warburg Pincus are also investors in Amtek Auto, holding as much as 6.7% and 5.78% respectively, as of September 30.