PE firms exit ACME Tele

Indian companies, which privately placed shares before their initial public offer (IPO), may get jitters as a group of private equity firms that had invested a little over Rs 600 crore in ACME Tele Power (ATPL) has decided to pull out of their investments in the Gurgaon-based firm.

Sources in the investment banking industry said the private equity firms, which invested the money last financial year, have exercised the put option. As a result, the promoters or the company will have to buy back these shares.

ATPL, which manufactures and supplies energy conservation solutions for telecom companies, was expected to hit the capital market before March 2008. However, the turmoil in the stock markets prevented the company from entering the market. Through the IPO, the promoters were planning to mop up around Rs 1,200 crore.

Just before the filing of red herring prospectus with the Securities and Exchange Board of India (Sebi) in November 2007, ATPL had raised Rs 197 crore at Rs 688 per share though private placement to DB International (Asia), Earthstone Holding and Kotak Mahindra Capital Company. The transaction had valued the company at Rs 11,800 crore. Again, in February this year, the promoters divested little over 3.5 per cent of their stake to Mauritius-based private equity funds Monsoon India Inflection and Jackson Heights Investments at the same valuation to mop up a little over Rs 400 crore.

According to the agreement between the promoters and the investors, in the event of ACME Tele Power not going ahead with the IPO, the investors have an exit option. Under the exit option, MKU Holding — the investment firm of the promoters — may purchase all the equity shares from the investors at the average investment price paid by them, or the promoters will procure a person resident outside India to purchase these shares or the company may buy back all of these shares, sources said.

When contacted, an ATPL spokesperson said the management would buyback these shares as and when the private equity firms sell it in the market.

“We are committed to buy back equity as and when these PE firms desire (to sell),” he added.

Without divulging the details of the buyback, the spokesperson said it (buyback) would be done by the group companies.

ATPL has manufacturing facilities at Pantnagar in Uttaranchal and Parawanoo in Himachal Pradesh. For the year ended March 31, 2007, ATPL reported a net profit of Rs 230 crore on a turnover of Rs 643 crore, compared with a net profit of Rs 116 crore and revenues of Rs 385 crore in the previous year.