TPG Capital’s part-exit may deliver it eight-fold returns in five years; deal size seen at Rs 2,500 crore
In what could be one of the most high-profile private equity (PE) deals in India in recent times, Temasek Holdings is in talks with PE major TPG Capital to buy a part of its stake in Shriram Transport Finance Company (STFC), India’s largest commercial vehicle financing company.
While Temasek is the investment vehicle of the government of Singapore, TPG is one of the largest growth capital and buyout funds. TPG owns 20 per cent in STFC and has appointed Credit Suisse to advise it on the exit strategy. TPG plans to offload a significant minority stake in the non-banking finance company.
People close to the development say Temasek wants to buy 10-14 per cent in STFC. A few other PE players are also in the race. However, their names could not be independently ascertained.
According to the Bombay Exchange data, last Friday, STFC’s market capitalisation was Rs 17,879 crore. So, TPG’s 20 per cent stake is valued at Rs 3,575 crore (around $800 million) at the current market price. The 14 per cent stake is valued around Rs 2,500 crore at the current market price.
In 2005, TPG bought close to 49 per cent in Shriram Holdings (Madras), the group holding company, for $100 million. The remaining 51 per cent was held by the Shriram group. The holding company owns 45 per cent in STFC.
This means TPG’s $100-million investment has grown eight-fold in five years. This is considered a good performance by any fund.
More From This Section
A Temasek spokesperson told Business Standard, “We do not comment on market rumours.” A TPG Capital spokesperson refused comment. Mails to STFC did not elicit any response.
The deal, if it takes place, will be one of the largest PE exits in India, after Actis’ sellout from Paras Pharmaceuticals in 2010. Actis invested about $45 million in Paras in 2006 for around 25 per cent stake. It sold the controlling stake (it bought more later, with total investment touching $150 million) for about $726 million along with Sequoia Capital to Reckitt Benckiser last year.
STFC has delivered huge returns for other PE firms in the past. In November 2009, New Delhi-based ChrysCapital exited after the value of its investment rose around 12 times. The PE firm earned more than Rs 1,400 crore on its Rs 120 crore investment made in 2005. Since January 2009, ChrysCap has sold its 18 per cent stake in STFC in separate transactions.
| MILESTONES Temasek’s top investments in India | |||
| Year | Company | Stake (%) | Investment ($mn) |
| 2010 | Max India | 3.00 | 26.62 |
| 2010 | NSE | 5.00 | 175.00 |
| 2010 | GMR | NA | 200.00 |
| 2008 | Lokmat | 15.00 | 26.00 |
| 2007 | Bharti Airtel | 4.99 | 2000.00 |
| 2007 | Tata Sky | 10.00 | 56.00 |
| 2006 | Tata Tele | 9.80 | 330.00 |
STFC’s assets under management have grown at a compounded annual growth rate of 41 per cent from Rs 7,437 crore in financial year 2005-06 to Rs 29,126 crore in 2009-10, according to a company statement. STFC has 484 branches and service centres. It registered sales of Rs 4,500 crore in 2009-10.
Temasek Holdings, which has invested about $3 billion in India since 2005, has a huge exposure to listed companies. By the end of 2010, it had bought three per cent in Max India for about $27 million from the open market.
Its major investments through the open market include ICICI Bank and Bharti Airtel. In 2007, it invested about $2 billion to acquire 5 per cent in Bharti Airtel. In 2006, it bought close to 10 per cent in Tata Teleservices (Maharashtra) from the market.
Last year, Temasek bought a 5 per cent stake in India’s largest exchange, the National Stock Exchange, from NYSE Euronext for $175 million. In one of the largest deals last year, Temasek invested $200 million in GMR Energy Ltd, the wholly-owned subsidiary of GMR Infrastructure Ltd.