Singapore-based billionaire Richard Chandler led investment firm Orient Global has exited its one and half year old investment in financial services group India Infoline, apparently at a loss of more than 50% according to VCCircle estimates. Orient Global had invested in India Infoline at the peak of the bull market and at the end of March’08 held over 11% stake through two funds—Orient Global Tamarind Fund Pte and Orient Global Cinnamon Capital Ltd.
Orient Global had picked stake through a preferential allotment in early 2008 after striking the deal in November 2007. It had picked 3.7 million shares at a price of Rs 1,500/share costing about Rs 550 crore (after stock split the shares cost works out to Rs 300/share) and valued the firm at Rs 8,564 crore (~$2.1 billion at that time).
This transaction was part of a multiple deal where Orient Global picked minority stakes in two other businesses of India Infoline. It had announced investments of $50 million to pick 10% in the Mumbai-based financial services firm’s insurance broking subsidiary and put in $76.7 million (Rs 300 crore) for a 22.5% stake in India Infoline Ltd’s consumer finance subsidiary, India Infoline Investment Services Ltd.
Orient Global had then picked around 5% in India Infoline through open market in the Jan-March’08 period, which could have been to average out the high priced transaction struck earlier. It is estimated that the firm put in close to Rs 300 crore to pick this additional stake which brought down the cost of investment to around Rs 260/share after stock split. As of March’09 Orient Global held 11.5% in India Infoline.
It sold some shares in the April-June quarter and exited the investments completely last week in what could have fetched it around Rs 400 crore against the cost of investment of Rs 850 crore. This means it took a haircut of around 53%.
It is not clear what is the fate of the two other deals—insurance broking and consumer finance business of India Infoline. Consumer finance in particular has been hit hard by the economic slowdown and many firms in the business have either rolled back their exposure or exited the space completely.
Orient Global is sitting on a profit in its other investment which was struck right after the market crash — minority stake in Cairn India. It had acquired 2.6% in a deal worth Rs 1115 crore at Rs 228/share. Cairn India scrip closed at Rs 243, around 5% above the cost price of Orient Global.