Private equity major Warburg Pincus has sold bulk of its holding in its seven-year-old investment in the diversified company Max India, which houses insurance and healthcare businesses of Analjit Singh, for Rs 308 crore ($59 million).

This comes after a part-exit in June this year when it sold around 2 per cent stake. Warburg Pincus held around 12.3 per cent stake in Max India as of September 30, 2011, through three investment arms and has sold around half of this in an open market transaction on Friday.

Given the PE firm’s recent moves, it seems to be making a final exit from the company as its existing investment in the group matures. These part-exits come as back-to-back transactions where the PE firm exited its direct holding in the healthcare arm Max Healthcare.

In June this year, 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 latest transaction was also struck at Rs 180 per share.

Max India scrip declined 1.5 per cent to close at Rs 167.1 on the BSE in a weak Mumbai market on Friday.

Warburg first 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 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 6.4 per cent stake in Max, which is valued at Rs 257 crore or $50 million.

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 had 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.

The deal was expected to be completed by December 15 this year and will increase Max India’s shareholding in Max Healthcare to 91.84 per cent. Another shareholders in Max Healthcare is 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.

Warburg Pincus Encashing India Investments

The PE firm has been on an exit mode from a string of portfolio firms. Besides Max Healthcare and Max India, in October it made a part-exit from private sector lender Kotak Mahindra Bank Ltd, selling a little over 1 per cent in the market for Rs 356.25 crore ($73 million). Warburg had sold 2.28 per cent stake in the bank in June and July for Rs 768 crore. The PE firm held 9.28 per cent stake in Kotak Mahindra as of March 2011, and has now reduced its holdings to less than 6 per cent. The PE firm had first invested in the bank way back in 2004.

In the past few months, the PE firm has completely exited DB Corp. It had also exited Amtek India and Vaibhav Gems earlier this year.

Recently, NYSE-listed outsourcing firm WNS Holdings filed a shelf registration in which Warburg is looking to offload its entire 47 per cent stake. Also, earlier this year, coal beneficiation and power generation firm ACB (India) had filed for an IPO in which the PE major plans to part-exit.

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