TPG raises $305 million from Shriram Transport sell-down

The US private equity firm halves its stake in the Indian commercial vehicle financier to about 10% after the share price gains more than 80% last year.
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Shriram Transport provides financing for new and used trucks, like this one made by Tata Motors </div>
<div style="text-align: left;"> Shriram Transport provides financing for new and used trucks, like this one made by Tata Motors </div>

US private equity firm TPG has halved its stake in Shriram Transport Finance, an Indian commercial vehicle financier, to about 10% via a block trade, raising Rs16.5 billion ($305 million). The deal launched on Wednesday evening and was completed before the opening of Indian trading yesterday.

The price was fixed at Rs715 per share, which marked the bottom of the indicative range and represented a 5.4% discount to Wednesday’s close of Rs755.95. It was the first time TPG sold shares in Shriram Transport since its initial investment. Prior to the sale it owned about 20.3% of the company.

The 23.1 million shares were marketed at a price between Rs715 and Rs755.95, with the top end of the range being equal to the latest closing price. The deal came with a “possibility to upsize,” according to the term sheet, although the size of the upsize option was not specified.

The deal was essentially covered at launch, a source said yesterday, adding that about 25 to 30 investors participated in the deal. The vast majority of the allocations went to long-only investors, and a majority was also allocated to Asian investors, the person noted.

The selling shareholder was the TPG Group through Newbridge India Investments II. The firm still owns approximately 22.9 million shares in Shriram Transport (a 10.1% stake) that are subject to a 45-day lock-up. Based on yesterday’s closing price, its remaining stake is valued at about $295 million.

Shriram Transport’s share price fell 7.5% after the transaction yesterday to Rs699.25, slipping below the offer price.

The stock had been trending higher leading up to the block trade. It was up about 24% from a low in November last year and gained about 81% in 2012 as a whole. The National Stock Exchange CNX Nifty Index fell 1.5% yesterday, as global stocks lost ground on worries about the outlook for the US stimulus plan. The index is now down 0.9% so far this year, after rising 27% last year.

Shriram Transport is one of the largest asset financing non-banking financial companies (NBFC) in India, with a market share of about 25% for pre-owned vehicles and about 6% to 7% in new truck financing, according to an investor presentation in December last year.

It is part of the Shriram conglomerate, which has a significant presence in financial services. Aside from the commercial vehicle financing business, it is also involved in consumer finance, life and general insurance, stock broking, chit funds and distribution of financial products, according to the company’s website. The group is also engaged in non-financial services businesses, such as property development, engineering projects and information technology.

In 2012, Shriram Transport booked Rs58.9 billion in revenues and Rs12.6 billion in net profit, up from revenues of Rs25 billion and a net profit of Rs3.9 billion in 2008.

Goldman Sachs was the sole bookrunner for the deal.

Some of the companies and investors looking to do deals appear eager to get them done before the government unveils its budget for the 2013-2014 fiscal year next week, as the budget is an uncertainty factor for the market.

Jaiprakash Power Ventures raised $175 million from a qualified institutional placement (QIP) that was completed before the opening of Indian trading on Wednesday. The Indian power company made use of a new rule allowing it to price the deal at a 5% discount to the floor price, and increased the deal size due to strong demand.

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