Elephant Capital, an India-focused private equity fund, has picked up around 1.5% stake in IT education firm NIIT Ltd for around Rs 15.5 crore through secondary market purchases between March and November 2008. This is the fifth investment in India for the AIM-listed India focused private equity firm. Elephant Capital is yet to disclose this new investment.
According to calculations by VCCircle based on the disclosures, Elephant Capital first acquired 0.6% stake (~1 million shares) in NIIT Ltd in March 2008 through the promissory notes route which is available to FIIs to invest in Indian public listed companies.
It added more shares (~1.6 million shares) of NIIT Ltd from the secondary market in October and November 2008 when the stock markets collapsed after the credit crisis following the bankruptcy of Lehman Brothers.
According to calculations done by VCCircle, Elephant Capital's average cost of acquisition is around Rs 59 per share as against the current scrip price of Rs 15. Though the fund managed to pare down the notional loss on value of investment -- it originally invested when share price was trading in the range of Rs 100-120, it is still sitting on huge dilution in equity value (~75%).
When contacted by VCCircle on the transaction: Elephant Capital investment advisor, Gaurav Burman, replied through an email, "We have a policy at Elephant of not commenting on transactions that we are working on or involved in."
Formerly known as Promethean India, the fund is managed by a team led by brothers Mohit and Gaurav Burman (part of the Dabur group promoter family). The firm raised £50 million in early 2007 through a public float at the AIM market in London. Its existing investments in India include: Mahindra Forgings, Obopay, Nitco Ltd and EIH. Most of these transactions have been through small equity stakes picked largely through secondary market purchases.
Partial Exit In EIH:
Meanwhile, the company has also disclosed that it has made a partial exit from from one of its portfolio companies - EIH Ltd, which runs the Oberoi Group of Hotels. Elephant had first invested in the luxury hotel chain operator in August 2007 and its cost of investments was £7.13 million for around 5.4 million shares.
In December 2008, it sold 1.3 million shares for around £2.1 million with a realised profit of £0.3 million (~Rs 2.5 crore translating into a return of around 16% for these shares). The fund still owns around 4.1 million shares of EIH and now the share price is estimated to be 10% lower than the estimated cost of acquisition. This partial exit was the first liquidity event for Elephant Capital.
More Investments To Flow
Elephant Capital chairman Peter Burt in his statement has said that 58% of the fund or about £28 million remains uninvested. "We believe that leaves us ample opportunity to do approximately 3-4 transactions over the next 18 months," Burt said.
The fund is conducting due diligence on a firm which is engaged in a high growth consumer industry where ‘the barriers to entry is high’. It is also looking at a pipeline of transactions some of which could give Elephant Capital a controlling stake.