Apax sells a part of its Cholamandalam stake for $102 million
Apax Partners had invested around $109 million in Cholamandalam in July 2014 to acquire a stake of about 10%
Private equity firm Apax Partners Llp on Friday partially exited its investment in Cholamandalam Investment and Finance Co. Ltd by selling shares worth around $102 million (around Rs.680 crore) in a block deal on the stock exchanges.
Apax had invested around $109 million in the company in July 2014 to acquire a stake of about 10%.
Cholamandalam Investment, part of the Murugappa Group, is a financing firm that offers loans for vehicles, homes and small and medium enterprises.
“Apax’s original investment in the company was $109 million. Today Apax has exited around 40% of its stake, selling stock worth almost $102 million. The investment has delivered an IRR of upwards of 50%,” said Shashank Singh, partner and head of India at Apax Partners.
Almost 68% of Cholamandalam Investment’s loan book comes from the commercial vehicles business. Loan disbursements for the June quarter stood at Rs.4,561 crore, 30% higher than last year’s figure of Rs.3,508 crore, Mint reported on 30 July.
Net profit increased 50% to Rs.166 crore in the June quarter from Rs.110 crore a year ago.
According to Singh, Apax had taken a bet on the company, given its strong management and an expected recovery in the commercial-vehicle market.
“The thesis around which we invested in the company was three-pronged. Firstly, we saw that this was a great company with a really top-class management. Secondly, the commercial vehicle market was in recovery mode after a long slowdown in the economy in the prior three to four years, wherein the CV market suffered a lot,” Singh said.
Finally, the company had put in place several initiatives around adoption of technology and data analytics in decision-making, which were going to result in an expansion in the return on assets in the business, he said.
“We had confidence in the company ahead of the market having appreciated it, and when market perception caught up, it caused the price to accelerate,” Singh added.
From the beginning of the year till date, Cholamandalam shares have risen 71.03% on BSE, while the stock exchange’s benchmark Sensex has gained 9.25%.
On Friday, the stock closed at Rs.1,097.85, down 6.04% on BSE, while the Sensex closed at 28,532.11 points, up 0.38% from the previous day’s close.
“We are very positive about the future growth of the company and are not in any rush to exit the remaining stake,” said Singh.