Investment fund Structured Investments Limited (SIL) has exited its two-year-old investment in textile firm Mandhana Industries through sale to the promoters ahead of the latter’s initial public offer (IPO).
Mandhana, which recently made a preferential allotment to Axis Bank for Rs 25 crore, is looking to raise around Rs 95-100 crore through fresh issue of shares.
SIL had invested Rs 7.4 crore in Mandhana in February 2008 at a price of Rs 298/share which works out to Rs 149 post bonus issue this year. In addition, it acquired some more shares from one of the minority shareholders of Mandhana at the same price.
Pursuant to this, SIL had the right to sell back the shares to the promoters if the IPO did not materialise by March’09. This buyback was to be completed by March’10.
The price at which promoters bought out SIL is not clear. It is estimated that the IPO issue price could be anywhere between Rs 115 and Rs 150/share and it could be that SIL exited the investment at par value or at a marginal loss. Nishith Desai Associates acted as SIL’s legal counsel for this transaction.
Axis Bank had struck the pre-IPO deal at Rs 115/share and hedged its deal with a similar buyback arrangement with promoters that gives it an IRR of 12.5%, if the IPO does not come out by March’10.