Creador gets 75% IRR in dollar terms on exiting Repco Home Fin

Fund has had one exit, from Old Town White Coffee, realising a 70% IRR last year

Private equity firm Creador has sold a majority of its stake in the housing finance firm Repco Home Finance for a total sale value of Rs 146 crore. The PE firm realised an IRR (internal rate of return) of about 75 per cent in US Dollar terms on the sale.

Creador Advisors India Private Limited Senior Managing Director Anand Narayan said that the fund realised an IRR of about 75 per cent in USD terms on the sale of five per cent stake.

The fund, which focussed on long-term investments in growth-oriented businesses in Indonesia, Malaysia, Singapore and India, has had one exit previously, from Old Town White Coffee where it realised a 70 per cent IRR last year.

Creador originally picked up a 9.9 per cent stake in Repco Home Finance Limited (RHFL) in 2013 for about $13.7 million (around Rs 73 crore during that time), but subsequently the stake fell to 7.46 per cent after the company's IPO. In the present transaction it sold around 5 per cent, leaving the balance to 2.46 per cent.

“Creador achieved the target returns with this investment and thought it was prudent to return some capital to our investors. We continue to believe that Repco Homes is a high quality business that has a great track record and it will continue to perform well,” said Narayanan, adding that Creador has an excellent relationship with the management and operating team at Repco.

Creador's investment in Repco was the fifth investment and the second transaction in India after its investment in Murugappa Group firm Cholamandalam Investment and Finance Co Ltd.

Earlier, in July this year, private equity firm Carlyle sold its entire stake in RHFL for Rs 471.5 crore. This was as against an investment of around $28 million in 2007. According to an announcement of the investment firm in January, 2008, the Carlyle Group invested $27.7 million in RHFL which was used to improve Repco's equity base, thereby allowing it to expand its loan portfolio. Carlyle had about 49 per cent stake at one point of time which was later diluted to bring in WCP Holding III, a fund from Wolfensohn Capital Partners into the company.

Wolfensohn Capital Partners (WCP) has bought around 13 per cent in the company from private equity player Carlyle during the first half of 2013. WCP, which is an investment fund of James Wolfensohn, former president of World Bank, later sold its shares in Repco Home Finance, according to sources.

On the sector's outlook, Narayan said, during a two-three year horizon the stock prices of smaller housing finance companies like Gruh and DHFL have appreciated over 100 per cent. Going forward, there are huge growth drivers for housing -- smart city developments, accelerating urbanisation, low house ownership, low penetration of housing finance. He expects this sector to grow 15-20 per cent every year.

He added, Repco is a high quality company with robust business process. Its disbursement growth in 2013-14 has been over 46 per cent, net interest margin or NIM growth was 52 per cent, operating expenses as percentage of net revenue was below 18 per cent and RoA was 2.6. These ratios are among the best in the industry.