Private equity major Warburg Pincus has made a partial exit from its seven-year-old investment in the flagship group company Max India, which houses insurance and healthcare businesses of Analjit Singh. This comes as a back-to-back transaction where the PE firm exited its direct holding in the healthcare arm Max Healthcare as its existing investment in the group matures.

On June 24, Warburg Pincus sold over 5 million shares in Max India to promoters for over Rs 90.65 crore ($20 million). The stake was sold by Warburg through its entity Parkville Holdings Ltd, at a price of Rs 180 per share, which would give the PE firm a return of 4.5x, according to VCCircle estimates. 

The deal involved a sale of 1.96 per cent stake in Max India, which was acquired by the promoter group company Maxopp Investments Ltd on the Nation Stock Exchange. This pushes up promoter holding to over 38.5 per cent, compared to 36.55 per cent as of March 31, 2011.

The share price of Max India was quoting at Rs 177.9 at 2:27 pm today, down 0.17 per cent.

Warburg invested in Max India in 2004, pipping ChrysCapital to the deal. It picked up 29 per cent stake in the firm for Rs 200 crore, subscribing to shares at a price of Rs 200 per unit. Max India later went for a stock split in 2007 in a ratio of 1:5, which brings down Warburg’s average investment per share to Rs 40.

Before the recent stake sale, Warburg Pincus held 14.64 per cent stake in Max India through its entities Madison Holdings, Melany Holdings and Parkville Holdings. The PE major still has around 12.68 per cent stake in Max, which is valued at more than Rs 578 crore as per the company’s market capitalisation.

Warburg had sold 5-6 per cent stake in Max India in July, 2009, for Rs 246 crore, making nearly 5x on its investment.

Other investors in Max India include Goldman Sachs Capital Partners (which recently converted its debentures for over 9 per cent stake) and Singapore sovereign wealth fund Temasek (which has taken 3.47 per cent from markets).

For FY11, Max India reported a net profit of Rs 9 crore against the loss of Rs 72 crore in FY10, with consolidated revenues up 3 per cent year-on-year at Rs 7,891 crore. Its group firms include life insurance JV Max New York Life, health insurance JV Max Bupa Health Insurance Ltd, healthcare chain Max Healthcare, clinical research firm Max Neeman Medical International and Max Speciality Films.

On June 17, Max India said that it was buying out 16.37 per cent stake held by Warburg Pincus in the healthcare arm of Max India for Rs 140 crore, ahead of a proposed rights issue for the hospital chain firm.

The deal is expected to be completed by December 15 this year and will increase Max India’s shareholding in Max Healthcare to 91.84 per cent. Other shareholders in Max Healthcare include World Bank's International Finance< Corporation. While the PE firm did not make much in this transaction, it has more than made it up with the multi-bagger in the parent firm.


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