Standard Chartered Private Equity (SCPE) is on its way out from its two-and-half-year-old investment in auto finance firm Mahindra & Mahindra Financial Services. The PE firm has sold half of its remaining 4.58% stake for Rs 167 crore with 2.6x returns. The PE firm, which held around 9.8% as of June end, has been selling chunks of its holding since last quarter like ChrysCapital who has also part-exited through multiple market transactions in the recent past.
SCPE had earlier sold a chunk of shares at an average part exit price of Rs 634 a share and has pocketed a higher return in the latest transaction, against an estimated cost of acquisition of around Rs 285 per share.
SCPE has reaped the benefit of patience compared with co-investor TPG Axon, the $14 billion hedge fund partially owned by the private-equity firm TPG. TPG Axon alongwith SCPE had together invested Rs 415 crore through a preferential allotment in March 2008 where the hedge fund picked 7.22% and SCPE bought around 4% stake at a price of Rs 380 per share.
TPG Axon had in June 2009 sold its entire stake in the open market for a total sum of Rs 184.21 crore, taking a 31% haircut on its original investment of Rs 266 crore.
In contrast, SCPE had bought shares from open market in most of 2008-2009 bringing down its average cost of purchase sharply. It is estimated that, in total, SCPE put in Rs 275 crore in the firm with an average price of approximately Rs 285 a share. This is 26% below the original cost of
ChrysCap, a pre-IPO investor of the firm that went public in March’06 with an issue price of Rs 200, had also upped its stake in the auto finance firm before the markets recovered. Bulk of its holding was, however, purchased gradually in the open market at a price range of Rs 250-300 per share. As of June 30, it held 9.97% stake that is valued at Rs 640 crore (~$138 million).
ChrysCap also sold a large chunk for Rs 225.7 crore recently. ChrysCap has also sold its entire 9% holding in another consumer finance firm Bajaj Auto Finance in the open market for around Rs 241 crore.
The two PE firms’ part exit comes at a time when the market benchmark indices are close to hitting all time highs of January 2008.