Blackstone exits Gokaldas Exports with 79% haircut

In 2007, Blackstone picked 70% stake in Gokaldas for Rs 676 crore, paying Rs 275 a share

Mathew Cyriac, the former co-head of Blackstone’s private equity (PE) business in India, has bought a 39.96 per cent stake in Gokaldas Exports from Blackstone for Rs 58.61 crore. The PE firm has taken a 79 per cent haircut to exit its decade-long investment. 

In 2007, Blackstone had picked up a 70 per cent stake in Gokaldas for Rs 676 crore, paying Rs 275 a share. 

Cyriac, with three others acting in concert, has launched an open offer to acquire another 26 per cent stake in Gokaldas Exports for Rs 63.25 a share, the firm informed shareholders on Saturday. 

The open offer will cost Rs 58.06 crore. Blackstone has been trying to sell Gokaldas without much luck and had made partial exits in the past few years.

The hit Blackstone has taken on this deal could be lower, as it had made partial exits by selling a 30 per cent stake over the years. 

The Gokaldas stock closed at Rs 80 on Monday, up 14 per cent, even as trading volumes doubled since the afternoon. The remaining 60 per cent stake in the company is held publicly, largely by individuals.

Cyriac was the “investor director” on the board of Gokaldas Exports until March 29, when the company informed the stock exchanges that Blackstone had withdrawn his nomination. But Cyriac continues to serve as a director. Neither he nor Blackstone commented.

But why is Cyriac throwing good money after bad? ‘‘It has made some progress but this is not yet reflected in its financials. It’s a high-risk gamble,” said a person familiar with the deal. The company reported a loss of Rs 22 crore on revenues of Rs 198 crore for the quarter ended December 2016, against a profit after tax (PAT) of Rs 26 crore on revenues of Rs 244 crore in December 2015.

Gokaldas was a bad buy for Blackstone, then headed by Akhil Gupta. 

The PE firm bought it at peak valuations, but Gokaldas’ fortunes fell sharply with the economic downturn in 2008-09, leading to loss of orders from the US and Europe. Gokaldas’ fall has also coincided with Bangladesh’s rise in garment exports, when it expanded its capacities four-fold.