Tano Capital, an Asia-focused alternative asset manager that runs an India-specific fund, has walked away with handsome returns by partially exiting a listed portfolio firm.
The mid-market PE firm sold about 1.84% stake in luggage maker Safari Industries last week, pocketing around Rs 28.7 crore (around $4.2 million at current exchange rates) before accounting for transaction costs and statutory levies.
This is the second time in six months that Tano has sold shares in Safari Industries.
Tano, which invested in Safari through its second fund Tano India Private Equity Fund-2 (TIPEF-2) four years ago, had sold a little over a quarter of its stake in Safari in February for Rs 51.2 crore (around $8 million). That transaction fetched a realised internal rate of return (IRR) of 48% in rupee teems, VCCircle estimates show.
As for the latest transaction, Tano has managed about 5.8x returns in local currency terms. This translates into a realised IRR of 53-54% for this transaction alone.
If the returns from the two transactions are combined, then the IRR turns out to be 49-50% - second only to Tano’s partial exit from non-bank lender Arohan Financial Services.
Private equity and venture capital firms typically chase an IRR of 20-30% in local currency terms.
“Safari has turned out to be a star performer for Tano Fund II and completely validates our thesis of backing great entrepreneurs in growing businesses,” said Goenka. “We continue to remain extremely bullish about our balance position in Safari.”
White Oak India Equity Fund, a Mumbai-based boutique investment firm running an alternative investment fund, and Acorn Private Equity’s India Acorn Fund lapped up Safari’s shares from Tano in the bulk deal, stock-exchange data showed.
Tano’s remaining stake in Safari is now worth Rs 195 crore ($28.5 million) at current rates. Tano had invested about Rs 49.8 crore ($8.33 million then) in Safari in June 2014 for an 18.65% stake, as per stock exchange data.
Tano’s recent exits
VCCircle had reported earlier this year that Tano had executed a series of partial exits in the recent past that enabled the PE firm to return a third of its second India fund to its investors.
In early March, Tano had sold about 4% stake in Arohan for around $6 milion to TR Capital. The PE firm’s remaining 19% stake in the lender is worth an estimated $30 million, based on the valuation it received in the most recent transaction.
The firm had surpassed benchmark returns when it sold a part of its holding in DCB Bank Ltd for about Rs 50 crore ($7.6 million). Its balance stake is worth around Rs 162 crore ($23.55 million) at current rates.
In June 2016, Tano sold a part of its stake in Shilpa Medicare Ltd for Rs 48 crore ($7 million), fetching stellar returns in the process. Its balance stake in Shilpa Medicare, an investment from TIPEF-2, is now worth roughly Rs 250 crore ($36.5 million).
Before the latest share sale in Safari, Tano had managed to return $30 million from its partial exits. The value of the balance stakes from these four portfolio companies alone indicate that the firm is able to notionally return capital well over the initial fund size of $110 million, which was fully deployed.
Besides, Tano has unrealised investments in recently listed apparel company Sanghvi Brands, unlisted cosmetic company Sanghvi Beauty and Technology Pvt. Ltd, ethnic women’s apparel company MSH Sarees Pvt Ltd or Jashn, drug formulation company Windlas Biotech Pvt Ltd, housing finance company VBHC Value Homes Pvt Ltd, and logistics company Shree Shubham Logistics Ltd.
In actual numbers, these returns are superior to the performance of the firm’s first fund, where it returned $56 million out of the deployed $79 million, although it is yet to fully exit fund 1 investments SSIPL and Promac Engineering.