By Pallavi S & Manish Tulsian (VCCircle.com)
The Singapore-based fund invested $375M in India Infoline and its subsidiaries and exited with just around $162M.
Singapore’s Orient Global Tamarind Fund Pte Ltd (Orient Global) is exiting its two year old investment in separate insurance services and consumer finance arms of India Infoline Ltd at a loss.
In a disclosure, India Infoline said that Orient Global is selling back its holding in the two unlisted subsidiaries India Infoline Investment Services Ltd (IIISL) and India Infoline Marketing Services Ltd (IIMSL) to its local partner, Mumbai-based parent financial services company.
Orient Global had acquired over 22% in the consumer finance arm IIISL for $76.7 million (~ Rs 300 crore) in November 2007 and is estimated to have participated in a rights issue in February 2008 with an additional investment of $34 million. It had also acquired 10% stake in IIIMSL for $50 million (~ Rs 197 crore) in December 2007.
This was just weeks before the markets crashed in Janaury’08 and brought down with itself valuations, specially in the financial services sector.
Now Orient Global is selling its 22% odd stake in IIISL for $72 million, or has taken a 35% haircut in US dollar terms. In this case due to the currency movements since the deal was struck, even India Infoline has to pay more than the value it struck two years ago. For India Infoline it would be cash outgo of around Rs 330 crore, i.e. valuation of around 10% more than what it had originally sold the stake for.
The loss in investment in the insurance arm is far higher for Orient Global. It is selling its 10.44% holding in IIMSL’s for a cash consideration of $8 million as against the acquisition cost of $50 million, translating into a loss in capital of 84%. For India Infoline it would mean cash outgo of around Rs 37 crore as against inflow of Rs 197 crore two years ago.
All told, India Infoline has gained while the Singapore fund has lost money. On completion of the above transaction, India Infoline’s stake in IIISL and IIMSL will increase to 99.02% and 99.16% of the equity capital of the respective firms.
Incidentally, Orient Global (led by Singapore-based billionaire Richard Chandler) which was also a large investor in the parent India Infoline had also exited from that investment at a loss of more than 50%, according to VCCircle estimates. Orient Global had invested about Rs 550 crore in India Infoline at the peak of the bull market and put in another Rs 300 odd crore later to average out the deal and exited that investment pocketing Rs 400 crore, i.e. less than half.
In total, Orient Global is estimated to have invested $375 million in India Infoline and its subsidiaries and exited with just around $162 million (after factoring in changes in currency movement) translating into a capital loss of 57%.
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