INDIA BUSINESS WORLD - OCTOBER 2006
THE MONTH THAT WAS...

CVC BAGS RS 801 CR FROM PART OF SUZLON

 VENTURE funds and private equity (PE) firms often dream of waking up in the morning to a multi-bagger — an investment that delivers returns that are many times the invested money. On Monday, the management team at CVC International, the private equity arm of Citigroup, experienced just that, when it sold a part of its holding in Suzlon Energy for Rs 801 crore. It had earlier realised Rs 185 crore during the IPO.

   CVC International had invested Rs 100 crore into the company in March '04, but half of this investment was debt, which was returned to the investor before Suzlon went public. Its unsold portion of the holding in the company is worth Rs 1,800 crore. Taken together, the total value of CVC International's holding is Rs 2,600 crore ($577 million), 26 times the initial investment.

   This transaction is arguably the third most profitable PE exit in India. Warburg Pincus tops the list with the $1.6 billion it made from Bharti Tele-Ventures, followed by CVC International, which made approximately $600 million by offloading its stake in i-flex to Oracle.

   Sources say Capital International, one of the largest FIIs in the country, bought the stake from CVC and will be the new investor in the company.

   "We made this investment as part of Citigroup's commitment to clean energy, and we were happy to support an entrepreneur like Tulsibhai Tanti, who has built a multinational company, in the area of wind energy. Through this transaction, another high-quality investor will come into the company and take its growth forward," says PR Srinivasan, director, CVC International, who led the Suzlon investment.

   The deal was initiated in late '03 and there was a lot of scepticism about the prospects of wind energy and the ability of Suzlon to scale up. The deal remained in the market for a long time and just about all PE firms eyed it.

PE fund Actis has exited Glenmark Pharmaceuticals, selling its final lot of about 6.7% in the pharma company to HSBC Global Investment Fund for Rs 304 crore, reports Vivek Sinha from New Delhi. Though the exact investment returns could not be ascertained, it is believed to be “substantial”, as the company's market valuation is pegged at Rs 5,062 crore, up from Rs 215 crore in March 2003. The UK-based fund, which first invested in the company in 2002, has been diluting its stake in the open market since two years. It held the Glenmark equity through two separate funds — CDC Investment Holdings and South Asia Regional Fund — and sold the total equity of 8 million shares through two block deals in the market. The two funds held 4 million shares each, and the deal was struck at a price of Rs 380 per share, translating into a deal value of Rs 152 crore each or a total of Rs 304 crore.

The PE fund first invested $10.2 million in Glenmark four years back through convertible debentures.

In September 2003, it held a total stake of 14.4% in the company. Since then, it has been gradually diluting its exposure through secondary market sales.
It first sold 2.5% stake in November 2004, and early this year made another partial exit by selling about 4.2% in the open market.

With the current transaction, Actis has made a final exit from Glenmark.

   Glenmark, a mid-size pharma company, is the fifth realised portfolio for Actis.
   In the past, Actis has exited its investments in four Indian companies, including BPO company Daksh, UTI Bank, Sify and Tavant Technologies. All the previous exits were in 2004.