New Vernon has partially exited its two-year-old investment in Shriram EPC. It has sold a little over 1% stake for around Rs 11 crore ($2.3 million) in the open market at a price of Rs 226/share.
The PE firm had originally invested in the company by acquiring part of the shares sold by ChrysCap just before the IPO of the firm. It acquired 4.6% (pre-dilution) stake for Rs 50.7 crore at Rs 290/share in November 2007 weeks before the stock market crash in January’08.
New Vernon had been trying to average out its cost of purchase ever since then. It picked a large chunk of shares as IPO trade and has thereafter been buying shares from the market every quarter since the IPO.
VCCircle estimates that it may have managed to bring down the average cost of purchase to around Rs 225-230/share, investing close to Rs 58 crore in total. This means it has sold out at par. Its remaining stake in Shriram EPC is currently valued at around Rs 50 crore.
ChrysCap had minted money in its pre-IPO selloff in Shriram EPC. It had invested Rs 30 crore in March 2005 at an average cost of Rs 60/share.
It sold off around 40% of its holding to the promoters (as per a call option clause in agreement) of the company encashing Rs 3.2 crore and sold the remaining stake to New Vernon and Argonaut for Rs 87 crore at Rs 290/share. So, it generated 2x 'net return' on its two-and-half-year-old investment in the firm.
Other pre-IPO investors in Shriram EPC, who are still shareholders, include Bessemer Venture Partners that owns over 24% stake, UTI Investment Advisory and Argonaut Ventures.