Windfall for TPG from Shriram Trans stake sale

This story first appeared in DNA Money edition on Friday, Feb 22, 2013.

TPG Capital, a private equity (PE) major, may have netted a whopping 450-500% returns, or a cool Rs1,350 crore in profit, from Thursday’s sale of around 50% of its 20.28% stake in Shriram Transport Finance Company or STFC, the country’s largest player in commercial vehicle finance.

In a bulk deal executed on the National Stock Exchange, Newbridge India Investment II Ltd, a unit of TPG, sold 23.15 million STFC shares (or a 10.2% stake), to Centura Investment, Sanlam Life Insurance and Swiss Finance Corp, at Rs715.15, for a total value of Rs1,656 crore.

Newbridge in 2006 acquired a 49% stake of unlisted group holding company Shriram Holding Madras Pvt Ltd (SHMPL), which holds 41.25% in STFC now. When STFC was merged with SHMPL in December 2011, Newbridge got a 20.28% in the merged entity. As per Bloomberg data, the (post-merger) acquisition cost of the 2006 deal for TPG worked out to Rs112.75 per share.

Based on this valuation, TPG is sitting on unrealised gains of over 450% from its 2006 investment.

According to Bloomberg data, the Newbridge-STPC deal is the largest of its kind in India since Cairn Energy sold a stake in Cairn India for `2,060 crore in June last year.

Thursday’s sale also marks the largest block deal in the country in nearly eight months, and comes after STFC shares gained 31% in the last one year.

But the shares tanked 9.4% to Rs685.10 in afternoon trade on Thursday, before recovering to close at Rs699.25, still down 7.72%. After Thursday’s bulk deal, TPG will have 22.85 million STFC shares, or a 10% stake, worth `1,600 crore.

Sanlam Life picked 8.4 million STFC shares, or a 3.7% stake, for `601 crore; Centura paid Rs270 crore for 3.77 million shares, or a 1.7% stake; and Swiss Finance Rs97 crore for 1.55 million shares, or a 0.68% stake. With this, the STFC stake of Sanlam, the South African insurance group, has risen to about 10%. It also holds stakes in the Chennai-based conglomerate Shriram Group’s insurance businesses.

Follow Ashish K Tiwari on twitter @ashishktiwari