Blackstone buys into VIP in first open market deal

Takes 2%, may raise this; part of widening trend of interest from PE funds in listed entities.

In its first open-market transaction in India, Blackstone, the global private equity major, has bought a two per cent share in India’s largest travel wear manufacturer, VIP Industries, which is valued at Rs 36-40 crore. VIP shares touched a monthly high of Rs 685 on the Bombay Stock Exchange on Thursday.

According to market sources, through further transactions, Blackstone is supposed to increase stake up to five per cent in VIP. A recent report had said VIP expected growth of 20 per cent in the next financial year. Its market capital is Rs 1,858 crore.

According to industry experts, the high valuation of unlisted companies and mounting competition force PE investors to look into the listed space. Mayank Rastogi, partner-private equity, Ernst & Young, said, “The logic for these deals is three-fold. There are listed companies available at relatively more sensible valuations than their unlisted peers, these companies provide for easy liquidity and the ability to flip at any time, and from a corporate governance perspective, listed companies are generally better placed than their unlisted peers.”

In VIP, the promoter and promoter group hold 43.93 per cent stake. Ace investor Rakesh Jhunjhunwala holds 4.47 per cent.

When asked, Dilip Piramal, chairman of VIP Industries, refused to talk. Akhil Gupta, chairman and managing director of Blackstone Advisors Pvt. Ltd, also refused to comment.

So far, Blackstone has made six investments in public companies through fresh equity shares, fully and compulsorily convertible debentures and optionally convertible warrants. Its largest investment was in Gokaldas Exports, where Blackstone holds about 68 per cent. In 2008 and 2009, Blackstone bought 5.72 per cent each in Allcargo Logistics.

Since 2005, Blackstone has invested about $1.5 billion (Rs 6,750 crore) in India, and plans to double the investment in the next five years. In one of the largest deals in the power sector, Blackstone invested about $300 million in Moser Baer Projects last year. Blackstone’s other investments in India include Gateway Rail ($64 mn), CMS Computers ($40 mn), Intelenet ($260 mn) and Emcure Pharma ($372 mn)

In 2011, there are 15 PE deals worth $945 million in public companies, of which four worth $25 million were through the open market. In 2010, there were 65 deals worth $1.07 billion, of which 24 worth $298 million were through the open market, according to VCCedge data.

Through open market transactions, in February, General Atlantic acquired stake in IndusInd Bank. Acacia Capital Partners bought stake in Net 4 India Ltd, Nalanda India Fund bought stake in V-Guard Industries and Sequoia Capital bought stake in Ess Dee Aluminimum Ltd.

Siva Ventures, the PE investment arm of the Siva Group, owned by serial investor C Sivasankaran, made the largest number of open market transactions last year. Siva Ventures invested in Ruchi Soya ($49 million), KS Oil ($55 mn), Arihant Foundations and Karuturi Global ($8 mn). In another major deal, CX partners invested about $34 million in Monnet Ispat & Energy Ltd last year. Temasek invested $21 million in Sobha Developers and $27 million in Max India Ltd last year.