Private equity firm Actis has inked a deal to sell its majority stake in public listed automotive lighting company Phoenix Lamps Ltd to auto component manufacturer Suprajit Engineering Ltd for up to Rs 154.3 crore ($24 million).
This could mark a full exit for the PE firm from its almost nine-year old investment.
As part of the agreement, Actis will sell 51 per cent stake in Phoenix Lamps to Suprajit for Rs 127.17 crore ($20 million). It may sell its remaining stake 10.88 per cent stake in the company for an additional Rs 27.12 crore depending on the acceptance level of shares in the mandatory open offer.
“Phoenix finds a strategic fit in Suprajit’s plan to diversify beyond cables, while retaining our core competence in cables and our focus on automotive component industry,” said Ajith Kumar Rai, chairman and managing director of Suprajit Engineering Ltd.
Suprajit group has 14 plants; 13 in India and one in the UK, which also operates as a technology centre for control cables for both automotive and non-automotive clients.
Suprajit has announced an open offer to the shareholders of Phoenix in line with SEBI regulations at a price of Rs 100 per share.
Suprajit, which itself is a public listed mid-size component manufacturer, has made an offer to buy shares from the public at Rs 100 a share which may give it up to 26 per cent stake more for as much as Rs 72.85 crore.
If the shares tendered in the open offer comprises less than 24 per cent (out of the total 26 per cent) stake then Actis will accordingly sell more shares to Suprajit. As per norms, listed companies need to maintain a free float or public shareholding of at least 25 per cent and Suprajit can own up to 75 per cent in Phoenix.
This means, if the public shareholders tender shares representing less than 13.12 per cent stake or half of the open offer, Actis could mark a full exit from the company by selling its remaining shares.
Suprajit has agreed to buy shares from Actis at Rs 89 a share as against the open offer price of Rs 100 each.
Actis had invested around Rs 315 crore to buy over 66 per cent in the firm in 2006-07 through a mix of stake purchase from previous promoters, preferential allotment and an open offer that saw full participation from the public shareholders. Two years ago the PE firm bought more shares of the firm through open market transactions for around Rs 8 crore. It committed around Rs 323 crore in total.
It has been selling shares of the firm for the last six months and has diluted around 8 per cent stake in the process for an estimated Rs 27 crore.
While the PE firm is exiting at a huge loss on the face value of investment, the total investment value erosion is not clear.
Two years ago Actis bought out the loss-making general lighting business unit of the firm for an undisclosed amount. Actis did not say how much it spent to buy this firm but the asset sale was pegged at Rs 76.71 crore net of adjustments. The value of this business is unlikely to compensate for the overall money Actis spent to do one of the rare control PE deals in India.
Indeed, in dollar value of deal it is estimated to have taken an even bigger hit in the investment.
Last November, Future Consumer Enterprise Ltd (FCEL), the food and FMCG arm of Kishore Biyani-led Future Group, acquired convenience stores chain Nilgiri's run by The Nilgiri Dairy Farm Pvt Ltd in south India from Actis.
One year ago it also exited another Indian portfolio firm Dalmia Bharat at a loss.
Grant Thornton LLP was the sole financial adviser to Suprajit Engineering in this transaction and Ernst & Young advised Actis on the exit.
Karvy is managing the open offer by Suprajit.