New Vernon Private Equity has apparently pressed the exit button from its over five-year-old investment in small-sized auto component maker Setco Automotive. New Vernon sold 1.4 per cent stake or a tenth of its holding for Rs 3.12 crore with over 2x returns in the open market on Tuesday.
The private equity firm had invested Rs 15 crore in December, 2005, to pick 14.17 per cent stake in the firm. Its average cost of purchase is pegged at Rs 60 per share against its part exit at Rs 125 per share.
Setco derives bulk of its business from clutch-driven plate and clutch cover assembly. Its consolidated revenues and profit rose sharply in the subsequent year to which New Vernon had invested in the firm. While sales growth decelerated since 2007-08, profits were almost flat for the past four years (Rs 13-14 crore).
Although it is a small firm by sales and market cap, Setco (formerly known as Gujarat Setco Clutch Ltd) is one of the top manufacturers of clutches for commercial vehicles in the world. Headquartered in Mumbai, the company has manufacturing presence across four locations, including two in India and one each in the UK and the USA.
During early 2009-10, the company completed its expansion programme by commissioning operations in the press shop at Kalol unit.
It has been in the process of debottlenecking capacities and improving efficiency at its existing units, besides enhancing R&D, designing and testing capabilities. Setco had earlier disclosed plans to set up a unit in an SEZ to cater to the growing export demand. The initiative to expand operations further was pegged to cost Rs 70 crore and was projected to be completed by 2012-13.
