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Market Action: Merlion India Fund On Exit Mode From ABG Shipyard

17 December, 2010

With the year coming to a close when the stock markets are expected to be on a sideways movement zone for a while, some private equity firms have become quite active before packing their bags for Christmas holidays. Merlion India Fund, a joint venture between Standard Chartered Private Equity and Temasek, appears to be well on its way to fully exit its five-year-old investment in ABG Shipyard and New York-based special situations hedge fund Clearwater is piling up on shares of IT services firm GSS America.

Merlion that sold a part of its pre-IPO investment in the shipping firm for Rs 51 crore ($11.4 million) early this month has sold another large chunk of shares on Thursday. It sold two-thirds of its remaining holding of about 6.2% for Rs 73.5 crore. It had earlier sold 2.55% out of the 8.67% it held as of September 30.

In total it has encashed Rs 124 crore at an average share price of Rs 376 a piece. This translates into returns of 3.2x (2.2x net). Merlion had co-invested along with IL&FS Private Equity (Leverage India Fund) and Standard Chartered PE in July 2005, months before the public float of ABG Shipyard. The shares were picked through a mix of fresh issue and purchase from the promoters at Rs 113 a piece.

Last year, Leverage India Fund had made a part exit from ABG Shipyard Ltd when it sold 0.5% with an estimated return of around 20%. At the same time, Standard Chartered Private Equity had increased its stake in ABG Shipyard from 1.3% in June 2008 to 5.41% by March 2009. It had bought initial part of the stake from open markets in 2006-end for a share price of Rs 217. ABG Shipyard also raised private equity funds from New York Life Investment Management India Ltd that exited its investment by June 2007.

At the same time, Clearwater Capital Partners is betting on IL&FS Private Equity-backed IT solutions firm GSS America. Clearwater that picked 4.2% in the Hyderabad-based managed IT services firm for Rs 8.9 crore ($2 million) early this week bought more shares on Thursday for Rs 3.4 crore.

Besides IL&FS PE that owns 13.12% stake in the firm, AIM-listed Kubera Cross Border Fund also owns 7% in GSS America. Early this year, media house Bennett, Coleman & Co Ltd (BCCL) had sold some shares in its two-year-investment in GSS America at a loss.

It is not just PE and hedge funds whose transactions are blinking on the Indian bourses. Serial investor C Sivasankaran has also got active. His group that took an exposure in Sujana Towers and substantially hiked holding in edible oil firm KS Oil, appears to have a bigger plan for the tower manufacturing firm.

Siva group firm Siva Projects Engineering and Enterprises Limited (SPEEL) that acquired 1.5% in Sujana Towers for around Rs 19.23 crore($4.2 million) on Tuesday hiked holding in the tower company. It bought another 3% for Rs 34.5 crore.

The promoters hold around 38% of the company, a quarter of which is pledged. Although this leaves a scope for a hostile takeover the promoters have been converting warrants issued by the company in December last year into shares which provides them a cushion against a sudden takeover move. The promoters holding has moved up from 33% as of December’09 to 38% and they have converted some more warrants into equity recently which will push their holding and dilute the equity percentage bought by SPEEL. Having said that Siva Group could just be looking at a portfolio investment in Sujana Towers.


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Market Action: Merlion India Fund On Exit Mode From ABG Shipyard

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