ChrysCapital, Bessemer Venture and India Advantage Fund have hiked their holding in Shriram City Union Finance through conversion of warrants resulting in fresh fund infusion of around Rs 96 crore in the TPG-backed company. The three PE funds had subscribed to warrants in May 2008 and had paid 10% of the total amount upfront.
With the expansion in capital, now Chryscap’s holding has moved up from 13% to 13.6% while Bessemer now owns 5.1% against 2.7% as of September-end and India Advantage Fund’s stake has moved up from 6.4% to 7.6%.
The warrants were allotted at a price of Rs 400 per share which was the average price during May 2008. Shriram City Union Finance scrip had seen levels of Rs 300 in March this year. Currently the share price is at Rs 386.
At this price, Bessemer is sitting marginally below the acquisition cost of Rs 400/share. It had picked the existing stake besides warrants in May 2008 at Rs 400/share.
Asiabridge also invested Rs 23 crore through a preferential allotment at the same price and got warrants. It is yet to announce whether it is converting warrants into equity.
Shriram City Union Finance specialises in small-ticket retail finance with over 600 business outlets across the country and claims to lend around Rs 300 crore each month in small-ticket size between Rs 8,000 and Rs 1 lakh, with tenors ranging from 12 to 36 months. For the year-ended March 2009, the consumer finance company had churned out over 50% revenue growth and 34% growth in net profit.
The company’s promoter shareholder is Shriram Retail Holdings in which buyout major TPG has invested. Last year, Shriram Group and TPG Capital had announced a definitive agreement under which the buyout firm was acquiring up to 49% stake in Shriram Retail Holdings. This deal gave TPG an indirect holding of 26.7% of the listed consumer finance arm.
That deal triggered an open offer in Shriram City Union Finance and, in September, the holding company acquired an additional 6.8% stake in the consumer finance company. Incidentally, the open offer price was also Rs 400, the price at which the warrants were allotted to the PE funds.
The offer was to pick up to 23.5% additional stake in the company for around Rs 431 crore. But, the actual money shelled out in the open offer was Rs 124.58 crore given the acceptance level of minority shareholders to participate in the offer. Post-offer, Shriram Retail Holdings own 57.7% in the 23-year-old company that focuses on consumer durable, two-wheeler, personal and enterprise financing across India.
But, Shriram Retail Holdings had decided not to convert 35 lakh warrants that it had subscribed to t the same time in May 08 when it brought in new investors. Had it gone for conversion, it would have had to bring in additional Rs 126 crore into the company.