Update 11/07/2011: Standard Chartered Private Equity informed the exchanges in a disclosure that it has picked up another 1.99 per cent stake in Redington by way of transfter of shares on July 7. The stake held by the PE firm now stands at 11.993 per cent.
The private equity arm of London-headquartered bank Standard Chartered plc has acquired 10 per cent stake for Rs 365.13 crore in Redington India, a distributor of telecom and information technology (IT) products.
Standard Chartered Private Equity and ECL Finance (an NBFC arm of Edelweiss) have together picked up a 12 per cent stake of Redington's promoters Kewalram Chanrai Group (through Redington Mauritius) and strategic investor Synnex Technology International Corp. The total deal is valued at around Rs 438 crore.
The transaction was at Rs 91.90 per share, a 3.43 per cent premium to Redington's closing price of Rs 88.85 per share on Friday, or July 1. The share price of Redington closed at Rs 88.5 per share, down marginally by 0.39 per cent, after reaching an intra-day high of Rs 93.5 per share.
Redington managing director R Srinivasan told CNBC TV 18 that the company wanted to continue as a management run firm and wanted none of the shareholders to hold over a 26 per cent stake.
"It has been a management run company and that is what Standard Chartered PE is backing with this transaction," said one source involved in the transaction.
After this transaction, the stake of Singapore-based Kewalram Chanrai Group will come down to 21.2 per cent from 28.89 per cent. Kewalram Chanrai Group, which also owns Singapore-listed commodities major Olam International, has been cutting its stake in the Chennai-based company since last year. The group had sold 13-14 per cent stake in July last year reducing its stake to a little below 29 per cent.
The stake of Taiwan-based IT products distributor Synnex Technology International will fall from 27.8 per cent to 23.7 per cent. It had invested $24 million in the company for a 36.31 per cent stake in Redington Group in 2004, which has since been diluted due to further share issue.
This will be one of the largest transactions by Standard Chartered PE in the Indian market. The PE has also invested $200 million in GMR Airports Holding Ltd, which runs the Delhi and Hyderabad airports, along with Jacob Ballas and JM Financial India Fund earlier this year. It also invested $200 million along with Kohlberg Kravis Roberts and New Silk Route Partners in VG Siddhartha’s group holding company Coffee Day Resorts Private Limited.
This will not be Redington's first brush with a private equity investor. The company, which clocked consolidated revenues of Rs 17,467 crore in FY11, had raised Rs 67 crore funding from Ashish Dhawan led ChrysCapital in 2006 before launching its IPO in 2007. ChrysCapital had exited its investment with a profit in 2009.
Currently, the institutional shareholders (who together hold over 56 per cent) in the firm include T Rowe Price (8.89 per cent), India Capital Fund (2.99 per cent) and Pinebridge Investments (1.58 per cent).
In 2008, Bahrain-based Investcorp invested $98 million for a 36 per cent stake in Redington India's subsidiary Redington Gulf, which distributes products in the Middle East and Africa.
Redington reported a 27 per cent increase in consolidated revenues to Rs 17,467 crore and a 23 per cent increase profit-after-tax to Rs 226 crore for FY11. Over 45 per cent of the company's revenues come from Middle East, Turkey and Africa.
Last year, Redington had expanded its operations by acquiring 49.4 per cent stake in Turkey-based Arena, distributor of IT products, for $42.5 million (about Rs 194 crore). Arena has a turnover of over $451 million.
There have been several transactions recently where private equity or venture capital investors have stepped in to buy promoters stake. Existing investors Helion Ventures and Canaan Partners along with new investor Sequoia Capital had recently picked up the entire stake of Ajay Agrawal, one of the co-founders of LPO UnitedLex Corporation for $16 million. Last week, former MindTree chairman and co-founder sold over half of his stake to early investor Coffee Day Group.