FII churn at Manappuram Finance

AA Development Capital India Fund has sold one per cent stake of the 5.23 per cent that it held with Manappuram Finance Ltd.

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 in the company, as on June 2011.

While AA Development Capital had realised Rs 44.95 crore through the stake sale, 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 the FII is still heavily invested in the company and has pulled out less than 20 per cent of its stake. While AA Development has obtained more than double its initial investment made three years ago, the residual stake is itself worth close to 10 times the original 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 close to five times its original investment.

What is noteworthy is 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 this exit and re-entry as normal churn of investments by FIIs.

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