New Silk Route PE exits VRL Logistics
Logistics | Photo Credit: Shah Junaid/VCCircle

Private equity firm New Silk Route (NSR) has exited from its four-year-old investment in goods and passenger transport services provider VRL Logistics Ltd, selling its remaining 5.16% stake for Rs 147 crore ($22 million) on Friday.

The shares were sold in the secondary market with an investment arm of Max Life Insurance buying a part of the shares.

The PE has made 3.4 times returns on its investment amount in the latest tranche which is more than what it generated in the part-exit last year, according to VCCircle estimates. NSR had sold some shares in the IPO of VRL Logistics, pocketing 2.25 times returns.

VRL Logistics that closed its IPO with 73 times oversubscription last year had seen its shares price pop up post listing. The company that priced its IPO at Rs 205 a share saw its scrip more than double within months before shedding much of the gains.

It ended at Rs 310.9 a share on BSE in a weak Mumbai market on Friday.

With this, NSR has pulled out a total of Rs 447 crore from VRL Logistics. The PE firm had put in around Rs 175 crore to buy the stake in 2011-12. It invested Rs 125 crore through a preferential allotment and bought shares worth Rs 50 crore from one of the promoters.

It had encashed  around Rs 300 crore in the IPO.

VRL Logistics' IPO recorded the biggest oversubscription number in seven years for a primary market issue, beating Reliance Power's issue in February 2008. Recently, the initial public offering of business services provider Quess Corp Ltd received bids for a whopping 144 times the number of shares on sale, making it the most attractive IPO in more than eight years.

This had come as a booster for NSR which had a poor show with another portfolio firm which went public. Last year, it also part-exited Ortel Communications by selling half of its holding. Initially, it was looking to part-exit Ortel but had offered to sell its entire holding when Ortel filed its draft red herring prospectus (DRHP) in September 2014, and again changed its plan and offered to sell around three-fourths of its holding as part of the offer for sale.

However, it had to cut down its offer-for-sale portion after the IPO of Ortel Communications failed to attract investors. The issue managed to sail through after the overall issue size was reduced wherein NSR cut the number of shares it sold from targeted 6 million to around 3.67 million. The share price of Ortel that had climbed a few months after listing is currently below the IPO price.

Coffee Day Enterprises Ltd, the parent of India's top coffee chain Cafe Coffee Day, was the third NSR portfolio firm that went public last year. It, too, currently trades below the IPO price.

Last year, NSR-controlled Destimoney had sold 49% stake in PNB Housing Finance to Carlyle.

Earlier, it had also exited from telecom infrastructure services firm Aster.

VRL Logistics

VRL Logistics that also counts Abu Dhabi Investment Authority, the sovereign wealth fund of Abu Dhabi, as an investor, reported a modest 3% growth in revenues to Rs 1,722.5 crore with a 12% rise in net profit to Rs 102.31 crore for the year ended March 31, 2016.

While goods transport generates three-fourths of its revenues, the rest comes from bus operations besides air chartering and power unit.

In a research note dated May 24, 2016, brokerage firm Prabhudas Lilladher said that the company's weak operational performance was below expectations and flagged concerns over the promoters of VRL announcing plans to pursue their interest in airlines by setting up a regional airline.

The brokerage firm that had put a reduce weightage on the stock believed that this may not find support with investors and this is likely to result in a de-rating of the stock, even though this initiative is still in a nascent stage and may take a few years to fructify.

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