Warburg Pincus is completely exiting its three year old investment in Dainik Bhaskar group flagship DB Corp. The PE firm will sell out its 7% stake in the company as a part of the initial public offer of DB Corp. DB Corp is coming with an issue of 24.78 million shares of which 12 million shares are on offer for sale from Cliffrose, an investment arm of Warburg.
According to VCCircle estimates the cost of investment for Warburg is around Rs 125/share after taking into account changes in capital structure including bonus issue.
Incidentally, Warburg was earlier looking to sell a part of the shares it held. The original draft prospectus filed in late 2007(just before the market crash) had said Warburg is looking to sell a part of the shares to a ‘third party’ prior to the IPO.
At that point DB Corp was coming out with an issue worth 18.8 million shares. Although the issue was put on the backburner even before a price band could be made public (after market tanked) the company was looking to raise more than Rs 660 crore which would have meant a valuation of over Rs 350/share. This would have valued the firm over Rs 6,500 crore, making it one of the most valued media firms in the country at that time.
But as per the new draft filed now, the company is looking to raise much smaller amount of around Rs 270 crore. Since the company is looking to issue a lower number of shares(12.75 million as against 18.8 million last year) it will have to price the issue above Rs 210/share.
Although, the actual issue price is yet to be determined and would most certainly be less than what it had planned earlier, at Rs 210/share as the lower end of the price band Warburg will stand to sit on a return of around 68% on its three year old investment.
At this pricing, the company would be valued at around Rs 3,810 crore, ahead of media firms such as Jagran Prakashan, Deccan Chronicle, IBN 18, TV 18, Zee News and NDTV.
The move to exit investment in the flagship company comes even as the PE firm appears to be going ahead with the other deal, where it is picking a small 3.2% stake in the radio business of the group, Synergy Media for Rs 1.52 crore.