Warburg converts Havells warrants at premium

Warburg Pincus, a private equity firm, today bought an additional stake in Havells India at a price that is almost six times to the electrical product company's current market price.

This comes at a time when several of Warburg's investments in Indian companies have plunged owing to a global meltdown in stocks. Even Citigroup is reported to have sold its investments in Havells.

Warburg bought more than Rs 155 crore worth stake, or 2.5 million shares, in Havells, after converting 2.5 million warrants at Rs 690 each. The Havells stock closed at Rs 114.45 on the Bombay Stock Exchange today.

The conversion will push up the stake of Warburg and its related entities to 14.5 per cent from 11 per cent earlier. Surprisingly, Warburg opted to convert the warrants at least three months earlier as the conversion was due in May 2009.

Sources say the conversion was compulsory and had legal implications if it was annulled, forcing Warburg to stay invested.

Analysts say the early conversion was to help Havells repay at least ¤12 million (Rs 75 crore) worth of debt of Germany's Sylvania, which it bought to expand its presence in global market and lower dependence on an increasingly competitive domestic market.

Sylvania has debt of around ¤200 million (Rs 1,200 crore), of which ¤24 million has recourse to the parent company. The company is expected to report losses of Rs 120 crore and Rs 31 crore in FY09 and FY10, according to analysts.

In fact several of the Warburg investments in the listed Indian companies have declined by more than 50 per cent. Some of its key investments include ICICI Bank, WNS, Rediff.com, Moser Baer, Punj Lloyd and Sintex Industries among others.

Warburg Pincus invests in industries including financial services, healthcare, media, information technology, energy and real estate.

The firm was created out of the merger of Eric Warburg's investment banking firm and Lionel L Pincus & Co in 1966.