AA Development Capital India Fund has offloaded one per cent of Manappuram Finance Ltd for Rs 44.95 crore.
AA Development Capital had invested Rs 22.4 crore in Manappuram Finance through a convertible preference share issue in 2008 and it had acquired 5.23 per cent stake, as on June 2011. The remaining 4.23 per cent stake is valued at Rs 205 crore.
The original investment was made by Ashmore Alchemy India, which is a joint venture between Alchemy Partners LLP and Ashmore Investments, UK, and was routed through AA Development Capital in India.
Reacting to the development, Mr I. Unnikrishnan, Managing Director of Manappuram Finance, pointed out that AA Development Capital is still heavily invested in the company and has pulled out less than 20 per cent of its stake.
While AA Development Capital has obtained more than double its initial investment made three years ago, the residual stake is itself worth close to 10 times its initial investment.
Dilution of stake and recouping the original investment is a normal operation in the stock markets and there is nothing surprising in the development, sources in the company said.
Last year, Sequoia Capital exited its investment in Manappuram by selling its 11 per cent stake for around Rs 293 crore in the open market.
This was valued at close to five times its original investment.
Affirmation of faith
What is noteworthy is the fact that FIIs such as Sequoia Capital and WestBridge Capital have reaffirmed their faith in the company and have re-purchased stake in the company, Mr Unnikrishnan said. “This re-investment goes to show the faith of these foreign investors in the company and its growth model.”
He perceived these exits and re-entry as normal churn of investments by FIIs.
After the exit of Sequoia and WestBridge, Manappuram Finance had raised further funds through investments from US-based private equity fund Granite Hill and Alchemy Ashmore.
Manappuram Finance reported 134 per cent increase in net profit at Rs 107.82 crore for the quarter ended June 30, 2011, with total income going up 164 per cent to Rs 493 crore.
Manappuram Finance had also launched its maiden public issue of secured redeemable non-convertible debentures to raise Rs 750 crore last month. The Manappuram stock closed down over one per cent at Rs 57.20 at the BSE today.