ChrysCap has sold almost a third of its stake or about 3.1% of Mahindra & Mahindra Financial Services (a non-banking finance company of Mahindra Group, focused on the rural and semi-urban sector for providing loans for utility vehicles, tractors and cars) for around Rs 199 crore. This comes close on the heels of a similar part exit by Standard Chartered Private Equity (SCPE) from its two-and-half-year-old investment in the auto finance firm and a complete exit by ChrysCap in another consumer finance firm Bajaj Auto Fin.
ChrysCap held around 9.9% stake in M&M Financial Services as of June 30 and has sold around 3 million shares at Rs 650 each. ChrysCap is a pre-IPO investor of the firm that went public in March'06 with an issue price of Rs 200. Bulk of its holding was, however, purchased gradually in the open market at a price range of Rs 250-300 per share.
The PE firm's part exit comes at a time when the market benchmark indices are close to hitting all time highs of January 2008 and begs a question whether PE firms see its rise as a tad too fast and time to encash.
SCPE had sold a quarter of its 9.8% stake in Mahindra & Mahindra Financial Services for Rs 146 crore over the last one month with returns of 2.2x. SCPE had sold at an average part exit price of Rs 634 a share against estimates of its average cost of acquisition of around Rs 285. SCPE has reaped the benefit of patience compared with co-investor TPG Axon, the $14-billion hedge fund partially owned by the private-equity firm TPG. TPG Axon alongwith SCPE had together invested Rs 415 crore through a preferential allotment in March 2008 where the hedge fund picked 7.22% and SCPE bought around 4% stake at a price of Rs 380 per share.
TPG Axon had in June 2009 sold its entire stake in the open market for a total sum of Rs 184.21 crore, taking a 31% haircut on its original investment of Rs 266 crore. Both ChrysCap and SCPE had been gradually buying shares from open market.
ChrysCap has also exited from its investment in another consumer finance firm by selling its entire 9% holding in Bajaj Auto Finance in the open market for around Rs 241 crore ($52 million) at an average price of around Rs 725 a share. The PE 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.
It 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 and had been holding on to it for the last three years.