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Warburg Pincus sells 25% stake in Capital First; GIC ups bet

17 May, 2017

Private equity giant Warburg Pincus has sold a 25% stake in non-banking finance company Capital First Ltd to a bunch of local and foreign investors including Singapore sovereign wealth fund GIC Pte Ltd.

Warburg Pincus now holds a 36% stake in Capital First compared with 61% earlier, the NBFC said in a stock-exchange filing on Wednesday.

The company didn’t disclose the deal value. However, based on Capital First’s closing share price of Rs 723.95 apiece, Warburg Pincus would have sold the stake for about Rs 1,750 crore ($275 million).
VCCircle had reported in August last year that the PE firm was planning to pare its stake in the lender.

The sale comes nearly five years after Warburg Pincus gained control of the NBFC from retailer Kishore Biyani’s Future Group.

Meanwhile, GIC bought an 8.93% stake in Capital First. GIC and its affiliate Caladium Investment Pte Ltd now own 13.91% of the NBFC compared with 4.97% earlier, according to stock-exchange filings.
GIC had, in November last year, picked up a stake in Capital First through an allotment of preferential shares.

Warburg’s investment
Warburg Pincus had acquired a majority stake in Future Capital Holdings in 2012 through a mix of a fresh issue of shares and a stake purchase from the promoters. Future Group first sold nearly a majority stake to Warburg Pincus and then fully exited the firm in 2014.

The PE firm invested an additional Rs 100 crore to subscribe to equity shares and compulsory convertible preference shares. Warburg Pincus later acquired a 24.43% stake in the company through an open offer and bought more shares on the open market to take its holding to 72%.

It pumped in more money as it co-invested in Capital First along with HDFC Standard Life Insurance Co to retain that holding. Its stake got diluted with fresh share issues, including a qualified institutional placement in 2015.

The stake sale to GIC and others is the fifth exit activity for Warburg in India since January 2015. It exited Metropolis Healthcare and QuEST Global in 2015, according to VCCEdge, the data research platform of VCCircle. In 2016, it pared its holding in non-banking finance company AU Financiers and Laurus Labs Ltd through its initial public offering.

Capital First was only its third financial services bet in India ever. In the past, Warburg Pincus had invested and exited Kotak Mahindra Bank.

This was also its first control PE deal in a publicly listed firm in India. Warburg Pincus had previously picked up a majority stake in a few privately held India-related firms such as Alliance Tire and WNS (before it went public), according to VCCEdge.

Capital First’s business
Capital First went public in 2008 with bumper oversubscription for its initial public offering. It has financed about 4 million customers since inception and has 222 branches, according to a company presentation to investors.

The firm has transformed its business over the past six years since Vaidyanathan took charge. Capital First was earlier focused on wholesale lending and retail lending comprised just 10% of its Rs 935 crore asset base in 2009-10. For the year ended 31 March 2017, its total assets under management rose to Rs 19,824 crore, retail lending comprised 93% of the total.

The gross non-performing assets of the company have declined from 5.28% in 2009-10 to 0.95% in 2016-17. Net NPAs fell from 3.78% to 0.30%.

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Warburg Pincus sells 25% stake in Capital First; GIC ups bet

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