Dubai-listed financial services firm Shuaa Capital has sold over two-thirds of its 2.2% holding in Edelweiss Capital for around Rs 59.3 crore to Reliance Capital. Shuaa, which was hit by the writedown in its investment in Lehman Brothers which sank in September 2008, is a pre-IPO investor in Edelweiss that went public in December 2007, and had been holding on to its 2.2% stake.

Shuaa sold 1.6% stake or 1.23 million shares of the company at Rs 482 a share at the NSE. Shuaa had invested $10 million (~Rs 45 crore at that time) and as per VCCircle estimates Shuaa had made the original investment at a price of Rs 275/share in December’06 (through a complex convertible preferential shares route). This gives it a return of around 70% for a large chunk of its shares. Shuaa remaining stake in the financial services firm is valued at Rs 22 crore.

Edelweiss share price had doubled within days of listing as against the IPO price of Rs 825/share. So at December end 2007 Shuaa was sitting on over 5x returns within one year of making the investment. But that was just a month before the stock market crash in January 2008.

Other shareholders of Edelweiss include GIC, Galleon Group and Sequoia. Shuaa is also an investor in Dubai-based Baer Capital which has separate investments in India.

Shuaa reported losses of $73.45 million for the third quarter (July-Sept) of this year. The company has been reporting losses since last year as a result of the global financial turmoil. The company had exposure to the structured products and fixed income securities of Lehman Brothers.

Shuaa operates in five business lines investment banking, asset management, brokerage, private equity and finance. Shuaa Partners in particular manages three private equity funds besides some heritage investments. In July 2008, Shuaa Partners announced the first closing of its $200 million Shuaa Hospitality Fund I and made its first investment.

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