How much return will CX Partners churn out from SIS IPO?

How much return will CX Partners churn out from SIS IPO?

By Ankit Doshi

  • 27 Jul 2017
How much return will CX Partners churn out from SIS IPO?
Credit: Shah Junaid/VCCircle

Homegrown private equity firm CX Partners will likely walk away with bountiful returns by partially exiting its four-year-old investment in Security and Intelligence Services (SIS) India Ltd through the company's initial public offering next week.

CX Partners had, in April 2013, invested Rs 194 crore ($35 million based on exchange rates then) for a 15.5% stake in the company, as per VCCircle estimates. It is selling a stake of around 4.75% in SIS through the IPO.

SIS has set a price band of Rs 805-815 per share for an issue size of Rs 779 crore. The IPO will open on 31 July and close two days later.


At the upper end of the price band, CX Partners' total stake is valued at Rs 868 crore. The PE firm will fetch about Rs 282 crore by selling a 4.75% stake. Its remaining stake will be worth Rs 586 crore.

CX Partners will earn four-and-a-half times return from its stake sale at an internal rate of return (IRR) of 45-50% in rupee terms, including dividends, as per VCCircle estimates. Private equity firms typically chase an IRR of 20-30% in local currency.

This is also higher than the seven-fold return that PE firm DE Shaw made in five years, translating into an IRR of 30-35%, when it exited SIS in 2013. DE Shaw had acquired a 14% stake in the company for Rs 18 crore, which it sold for Rs 126 crore to CX Partners.


An email query sent to CX Partners did not elicit a response till the time of publishing this report.

CX Partners

The private equity firm has struck a number of exits in recent months. Earlier this month, it sold its remaining stake in diagnostics firm Thyrocare Technologies Ltd for about Rs 75-80 crore. It had earlier sold 19% of the 21% stake it held in Thyrocare when the diagnostics firm had made a blockbuster listing last year.


CX Partners earned seven times return from the latest transaction while the overall return from Thyrocare was around three times, including dividends, as per VCCircle estimates.

Last month, CX Partners had sold shares worth Rs 111 crore in Hyderabad-based Natco Pharma Ltd, generating more than seven-fold return on its investment. The same month, it also exited private lender Karur Vysya Bank.

According to VCCEdge data, it has also exited steelmaker Monnet Ispat and Energy Ltd. Besides, it has offloaded some of its stake in financial services firm Convexity Solutions and Advisors Pvt. Ltd and healthcare equipment maker Sutures India Pvt. Ltd.


The PE firm’s other portfolio firms include wireless telecom services provider Matrix Cellular International Services Ltd, electrical components maker NTL Electronics India Ltd and microlender Ujjivan Financial Services Ltd, besides a franchisee partner of fast-food chain Yum Restaurants.

In February this year, CX Partners wound up its mezzanine debt fund, CX Intermediate Capital Fund, having exited all its investments and returned money to its investors, the PE firm’s managing partner Jayanta Basu said in a previous interaction with VCCircle.



SIS will be the first security services firm to go public in the country and its IPO will be keenly watched by other private equity-backed peers such as Tops Security Ltd.

Apart from providing security services, SIS offers cash logistics services to banks, home alarm monitoring and response services and facility management services to corporate clients. SIS has a network of 229 branches and 136,000 employees across India. It also operates in Australia.

Axis Capital, ICICI Securities, IIFL, Kotak Mahindra Capital, SBI Capital, Yes Securities and IDBI Capital are managing the issue.

SIS aims to raise Rs 362.25 crore via a fresh issue of shares while selling shareholders, including CX Partners, are expected to fetch Rs 417 crore.

The company, which claims to be India’s second-largest private security services firm by revenue, had filed its draft prospectus for the IPO with the Securities and Exchange Board of India in September last year.

However, the capital markets regulator had kept its share sale in abeyance as the firm did not meet regulations meant for registered Indian companies. The firm had issued shares to more than 49 people through private placements in nine instances between 1988 and 2012. This was not in compliance with the Companies Act, 1956, which bars any private placement of shares to more than 49 people.

As per the amended Companies Act, 2013, if a company issues shares to more than 49 investors and up to 200 investors, it can refund the investors with interest and avoid penal action. SEBI’s regulations were amended accordingly in December 2015.

Other companies that faced similar problems include private-sector lender RBL Bank Ltd and Thyrocare. Both companies last year floated IPOs that were heavily oversubscribed.

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