Warburg Pincus has just made another part-exit from its India portfolio with as much as 94 per cent haircut on its eight-year-old investment into public-listed Moser Baer India Ltd, as per VCCircle estimates. The PE major has been on an exit mode from its mature investments in India and has struck a slew of part and full exits from its local portfolio over the past one year even as it invested afresh in new companies.
Moser Baer is an optical storage company, which has diversified into power business under its private equity-backed subsidiaries. The loss-laden parent firm also counts IFC and ChrysCapital among its investors.
Warburg Pincus had originally invested in the company way back in 2000 and pumped in more capital in 2002 and 2004. It is estimated to have bet around $220 million in total, making Moser Baer one of the biggest PE-funded public listed companies in the country. Warburg Pincus invested $62 million as the lead investor in a $77 million financing round to partially fund the company's expansion plans in the CD-R business. At that time, Moser Baer, a manufacturer of floppy disks, was moving into the CD-R business.
Warburg Pincus invested another $10 million in the company in 2002, to support its expansion plans. In 2004, it pumped in another $149 million (Rs 675 crore then) through GDRs and equity convertible warrants.
The PE firm held around 33.55 per cent stake in Moser Baer and sold 24.5 per cent stake to a Seychelles-based entity called Global Town Investment Ltd in an off-market deal earlier this week. Instead of selling the stake directly, it sold control of three Mauritius-based investment entities that separately held shares in Moser Baer India.
The company did not disclose the deal value but at the current market price, it would have translated into a deal worth Rs 57 crore or a tad less than $11 million.
In the last round of funding, Warburg Pincus had subscribed to securities at Rs 336 a share which after bonus share issue comes to around Rs 224. Moser Baer India scrip declined 1.1 per cent to close at Rs 13.52 a share in the BSE on Wednesday.
The background of Global Town Investment could not be immediately ascertained, though. Since the quantum of shares purchased is less than the trigger point of 25 per cent, it would not lead to any open offer either, although nearly one-fourth of the company’s shares have changed hands. The promoters held only 16.29 per cent stake in the flagship company as of March 2012, which means Global Town Investment is the single largest shareholder in the company.
Separate e-mail queries to Moser Baer India spokesperson and Warburg Pincus India chief did not elicit any response till the time of writing this article.
From being one of the champions of Indian industry who made it big globally as a key manufacturer of optical storage products, Moser Baer slid into heavy losses that kept on piling over a period of time. This happened due to a sharp drop in its product prices as global capacity and competition did not allow the company to generate margins in a world where the raw material price did not crumble to the same extent. The company diversified into other businesses like entertainment, but that was not enough.
For the year ended March 31, 2011, the company had consolidated a net loss of Rs 848 crore, with revenues of Rs 2,682 crore. At a standalone level, the company reported a net loss of Rs 400 crore on revenues of Rs 1,872 crore.
For Warburg Pincus, this part-exit adds to the mixed bag of returns from its India portfolio. Two months ago, it had completed its exit from private sector lender Kotak Mahindra Bank Ltd, garnering over Rs 3,400 crore ($661 million) in the process spread over nine months. Warburg Pincus held 9.28 per cent stake in Kotak Mahindra before it started exiting in June 2011. This marked the largest exit by Warburg Pincus after India's biggest mobile operator Bharti Airtel, where it encashed $1.83 billion on its original $290 million investment.
Last month, it once again hit the part-exit button on Max India. Warburg Pincus had been selling chunks of Max India shares for the last three years with over 4x returns. It first invested in Max India in 2004, pipping ChrysCapital to the deal, and picked up 29 per cent stake in the firm for Rs 200 crore.
However, the marquee PE firm also struck a few duds.
Last June, Warburg Pincus said that it was exiting its six-year-old investment in the healthcare arm of Analjit Singh’s Max India at par, ahead of its proposed rights issue. Max India disclosed that it was buying the 16.37 per cent stake held by Warburg Pincus in Max Healthcare Institute Ltd for Rs 140 crore. Although Warburg Pincus had not taken any haircut in this deal, the PE firm lost out on an opportunity cost basis. Warburg Pincus had invested Rs 140 crore in two tranches in January 2005 (Rs 25 crore) and June 2005 (Rs 115 crore).
Last March, Warburg Pincus had exited its five-year-old investment in gem & jewellery exporter Vaibhav Gems with an estimated 92.5 per cent haircut. The latest transaction could have beaten that transaction in terms of losses (not counting dividend earnings over the years, if any).
Warburg Pincus Offloads Vaibhav Gems Stake At Huge Haircut
Warburg Pincus Exits Max Healthcare At Par
Warburg Pincus Completes Kotak Mahindra Exit For Over $661M