SAIF Partners, an Asia-focused venture and growth capital investor, has quietly picked up 7.74 per cent stake in steel product manufacturer Pennar Industries for around Rs 35 crore through a string of secondary market transactions over the last six months. With the latest tranche of stake buy on Wednesday, the PE firm has raised its holding through SAIF India IV FII Holdings Ltd and some other entities.

The investment comes as Pennar is diversifying itself from a steel manufacturer to value added steel and pre-engineered steel buildings manufacturer.

Although SAIF Partners does not figure among the prominent institutional investors as of September 30, 2011, with the latest round of stake purchase comprising some 3 per cent stake its holding has shot up to over 7 per cent, according to sources with knowledge of the development. A SAIF Partners executive confirmed the development adding that the investment in Pennar is a play on the Indian industrial growth.

Elara Capital was the advisor to SAIF on the transaction.

Pennar, also backed by investors like Eight Capital India and Spinnaker Global, manufactures steel products such as cold-rolled steel strips, precision tubes, cold-rolled formed sections, electro-static precipitators, profiles, railway wagons and coach components, press steel components and road safety systems.

The Hyderabad-based company, founded in 1988, generated revenues of Rs 1,208 crore, with net profit of Rs 74 crore for the year ended March 31, 2011.

Pennar Industries’ scrip was down 3.3 per cent to close at Rs 38.1 a share on Thursday on the BSE.

Its subsidiary PEBS Pennar, engaged in manufacturing pre- engineered buildings, has an order book of Rs 215 crore to be executed over the next six months, according to a report from brokerage house SPA Securities.

"Pennar Industries is gradually moving from being a steel products manufacturer to a value added steel producer. The company's subsidiary is also emerging as a turnkey player providing pre-engineered steel buildings. With strong clientele, diverse base of user industries and introduction of new products augur well for the company. At the CMP of INR 38.15, the company is trading at a P/E multiple of 6.27x and at an EV/EBIDTA multiple of 4.15x based on its FY11 earnings," added the report.

SAIF Partners, which currently manages assets over $3.5 billion, has been quite an active investor in India this year though mainly making early stage investments in the internet space. The PE firm has also made successful bets in the market since 2008. It exited its investments in IT services firm MindTree Ltd and engineering firm Thermax Ltd for over 2x in 2009.

Earlier this year, SAIF exited lighting & electrical products maker Havells India at 3x. In the manufacturing space, SAIF Partners has an existing investment in Thermax.

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