US private equity firm Bain Capital will sell half its holding in Hero MotoCorp, worth up to $393 million (about Rs 2,328 crore). The stake will be sold through open market transactions on Friday. According to the term sheet prepared by Citibank, the banker for the deal, Bain will offload 4.29 per cent stake in the Delhi-based company, selling 8.57 million shares through an accelerated book building offering.
While Bain Capital declined comment, a statement by Brij Mohan Lall Om Prakash, the investment arm of the Hero Group, said Bain had been an investor in Hero MotoCorp for about three and half years, adding typically, financial investors such as Bain had a three-to-five-year investment horizon. Bain, the statement said, had decided to partially monetise its investment now.
"As promoters of Hero MotoCorp, we are very confident this monetisation will help bring in a wider set of high-quality, long-term investors to participate in the Hero story. In the long run, this will further diversify and strengthen Hero's investor base and bring more stability."
The term sheet said the offering would be for $300 million (Rs 1,777 crore), with an option to sell up to $393 million (Rs 2,328 crore). Based on Thursday's BSE closing stock price, Bain Capital's holding in the Munjal-promoted company stands at Rs 4,642 crore.
The share sale will likely be carried out a discount of up to five per cent to Hero MotoCorp's closing price of Rs 2,708.55 on Thursday - in a range of Rs 2,582-2,717 a share. Institutional investors have been asked to bid for the shares.
As of March 31 this year, Bain held 17.14 million shares in Hero MotoCorp - a stake of 8.58 per cent. Excluding the company's promoters, BC India Pvt Investors II, Bain Capital's domestic outfit, is the single-largest shareholder in Hero MotoCorp. Even after the stake sale, it will continue to hold this position.
The private equity company held 19.81 per cent stake in Hero Investments Private Ltd, the Munjals' privately held, unlisted entity. The investment firm, which held 43 per cent stake in the two-wheeler company, was merged with Hero MotoCorp two years ago.
Bain Capital and Government of Singapore Investment Corp (GIC) had acquired stake in HIPL for $851 million (Rs 3,841 crore). GIC, through Lathe Investment Pte, owns 3.71 per cent stake in Hero MotoCorp; as of today, the stake is valued at Rs 2,005 crore. Private equity funding allowed HIPL to buy Honda's 26 per cent stake in Hero Honda at Rs 739.97 a share, a discount of about 50 per cent to Hero Honda's share price at that time. Bain, an active investor in India, has committed about $2 billion (Rs 12,000 crore) in the country in the past four years. It had marked its India debut by acquiring 16 per cent stake in Himadri Chemicals for Rs 580 crore.
Currently, its arm BC India Investments, holds about 26.57 per cent in Himadri. In 2012, Bain bought 30 per cent stake in Genpact for $1 billion (about Rs 5,583 crore).