TPG Capital puts $25M more in Flexituff through FCCB, may hike stake to 24.7%

Private equity major TPG Capital, which recently committed Rs 27 crore ($5 million) in Madhya Pradesh-based bulk container manufacturing firm Flexituff International Ltd, has put in another Rs 135 crore ($25 million) in the firm through subscription to foreign currency convertible bond (FCCB), as per a stock market disclosure.

On conversion of FCCB into equity TPG will own around 24.7 per cent stake in the firm, assuming no fresh equity dilution takes place. FCCB will mature for redemption/conversion by April 2018.

TPG currently owns 5.3 per cent stake in Flexituff which it picked through a preferential issue. This has taken TPG’s total investment commitment to Flexituff at Rs 162 crore ($30 million).

Assuming full conversion of FCCB into equity it’s holding of the diluted capital would be 24.7 per cent. TPG also disclosed that even as it directly controls 5.3 per cent as of now, Flexituff has also pledged around 6.63 per cent stake in favour of TPG which will be around 5.05 per cent post dilution of capital. Such pledges are part of FCCB issues and are usually made by the promoters of the firm raising money through FCCB.

Assuming the pledged shares are not invoked and there is no substantial equity issue in the next five years, TPG would still own less than 25 per cent stake in the public listed company. This would mean the extra investment by TPG will not trigger the mandatory open offer.

According to the disclosure, the PE giant invested by subscribing to FCCBs which would translate into 6,211,009 equity shares on conversion at the price of Rs 218 per share (subject to adjustments) on a private placement basis.

Flexituff scrip closed at Rs 223.50, up 1.15 per cent on the BSE in a strong Mumbai market on Monday.

Founded in 1993, Flexituff International is a flexible intermediate bulk container manufacturing company which offers products like form stable baffle bags, form fitted liner bags, glued liner bags, etc.

It had earlier raised PE funding from Clearwater Capital. In 2007, Clearwater Capital Partners invested Rs 46 crore in Flexituff, picking 26.07 per cent stake. It also part-exited during the company’s IPO in 2011. Clearwater’s stake in the company has got diluted marginally with the fresh investment by TPG.

TPG, one of the top global PE firms, has been quiet for the last two years in India. However, this marks its second investment in the country within last two months. Early this month it invested $22.98 million in Bangalore-based Sutures India Pvt Ltd wherein it picked 20 per cent stake.

It had previously invested in two firms in 2011 – AGS Transact and Shriram Capital. Since then, TPG exited its previous investment in Shriram Transport Finance besides apparel retail firm Lilliput Kidswear, which was reportedly a write-off.

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