Tano Capital investing $12.5M to hike stake in Shilpa Medicare

Mumbai-based private equity firm Tano Capital is looking to almost double its holding in Karnataka-based pharmaceutical ingredients manufacturer Shilpa Medicare Ltd by investing up to Rs 75 crore ($12.5 million) through a preferential allotment.

Tano is an existing investor in the public listed company. It had invested an estimated Rs 30 crore through secondary market transactions starting two years ago.

The company’s share price has almost doubled since the time Tano started accumulating shares of the firm. Shilpa Medicare also issued bonus shares last year which brought down the average price of acquisition of shares by Tano further.

It is currently sitting on 2.6x in unrealised gains on its existing investment, as per VCCircle estimates.

In the proposed transaction it will subscribe to 1.76 million fresh shares which would be worth up to Rs 75 crore. The pricing of the issue has not been frozen yet. Shilpa Medicare has scheduled an EGM on May 12 to approve the proposal.

The allotment will take Tano’s holding to 9.31 per cent. It will become the top institutional shareholder marginally surpassing Baring PE India. Baring PE India is currently the largest non-promoter shareholder owning around 9.67 per cent stake, which would shrink to 9.24 per cent post the preferential allotment to Tano.

This is the second time Tano Capital is betting on Shilpa Medicare. Tano Capital invested around $2 million in Shilpa Medicare in early 2006 from its Fund I and exited in August 2010 with 4.5x returns. Prior to that, Strategic Ventures Fund Ltd (SVF), a private equity fund managed by Frontline Strategy, also exited Shilpa Medicare with 4x returns.

Baring PE India has a higher average cost of purchase per share and is estimated to be sitting on just under 2x on its investment in the firm.

Shilpa Medicare is a Raichur-based (Karnataka) mid-size pharma company, manufacturing API, fine chemicals, intermediates, herbal products and specialty chemical products.

For the third quarter ended December 31, 2013, the company saw its consolidated revenues rise 64 per cent to Rs 154.3 crore with net profit growing by a similar quantum to Rs 20.6 crore, over the year-ago period.

(Edited by Joby Puthuparampil Johnson)

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