Buyout giant TPG Capital has hiked stake in Shriram Retail Holdings Pvt Ltd (SRHPL) from 42% to 49% by conversion of warrants into equity. SRHPL is the majority shareholder of Shriram City Union Finance (SCUF), the consumer finance arm of the Chennai-based business group.
As per the deal announced in September 2008, TPG had agreed to acquire up to 49% in SRHPL for Rs 530 crore through a mix of equity issue and warrants. Thereafter, SRHPL, backed by TPG, acquired an additional 6.8% in SCUF through an open offer in August 2009 that took its stake to 57.73%. This gives TPG an indirect holding of 28.28%.
The open offer was made at a price of Rs 400 per share against the current price of SCUF which is now trading at Rs 432 a piece. The indirect stake of TPG is valued at Rs 568 crore currently, 7% more than its cost of acquisition around one year ago.
TPG is not alone in betting big on SCUF. Other PE investors in the firm include ChrysCapital, Bessemer Venture and India Advantage Fund who incidentally also hiked their holding in November 2009 through conversion of warrants resulting in fresh fund infusion of around Rs 96 crore. These three PE funds had subscribed to warrants in May 2008 at a price of Rs 400 a piece. ChrysCap’s holds 13.6% while Bessemer owns 5.1% and India Advantage Fund owns 7.6% in SCUF.
Shriram City Union Finance specialises in small-ticket retail finance with over 600 business outlets across the country and claims to lend around Rs 300 crore each month in small-ticket size between Rs 8,000 and Rs 1 lakh, with tenors ranging from 12 to 36 months. For the year-ended March 2009, the consumer finance company had churned out over 50% revenue growth and 34% growth in net profit.