New York Life Investment Management (NYLIM) is part exiting Commercial Engineers & Body Builders Co Ltd by selling a sixth of its existing share holding in the IPO. NYLIM could also be selling additional shares in the locomotive body maker to another investor thrrough pre-IPO transaction.
Commercial Engineers & Body Builders makes bodies for commercial vehicles and for rail wagons. It plans to use half of fresh funds raised through the IPO to set up a rail wagon and EMU coach manufacturing plant. For the six months ended September FY09, it had net sales of Rs 100 crore with net profit of around 11 crore.
NYLIM had invested Rs 30 crore in December FY07 in the company and currently owns 23.3% stake. It is selling around 1.4 million of 9.9 million shares that it owns in the public issue that also seeks to raise Rs 170 crore through sale of new shares. NYLIM’s average cost of purchase works out to be Rs 30 a piece.
Assuming the promoters Kailash and Ajay Gupta(who currently hold 76% stake) would like to own atleast 51% of the total equity post issue, the maximum number of fresh shares that could be issued in the IPO is around 22 million. This would translate into issue price of around Rs 75-80/share given that the company hopes to raise Rs 170 crore in the IPO.
At this level NYLIM could be potentially looking at valuation upside of 2.5x or net returns of 1.5x in its two and half year old investment.
But the IPO could turn out to be a real multibagger for Mosaic Capital, an eight year old investment banking and advisory firm. Mosaic Capital which was involved in PE syndication for growth capital for Commercial Engineers & Body Builders(believed to be for the NYLIM investment) had picked a small quantum of shares at par in November’07.
Its 0.16% stake at present works out to an average cost of acquisition of just Rs 1.6 which would translate into 50x returns in two and half years flat, beating most VC and PE investors till date. Mosaic Capital was set up in late 2002 and has four partners Vinay Shah, Ashutosh Ghanekar, Vikram Bihani and Sanjay Krishnan who have worked in Ambit Corporate Finance, Arthur Andersen, Coopers & Lybrand and Price Waterhouse besides Ispat group.
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