In the first private equity deal struck by Chennai-based, Rs 1,400 crore auto component group ,Rane, Mumbai-based private equity investment firm Blue River Capital has picked up 10.22% stake in Rane Holdings (RHL).
Blue River has invested $4.7 Million in the holding arm of the Rane group and the Rs 10 paid up share of RHL was valued at Rs 192. On Friday September 31, RHL scrip closed at Rs 156 on BSE. It has acquired the stake from the promoter group through a secondary market transaction.
The PE firm has made the investment in the holding arm of the family business group through its Mauritius-based investment company. Its representative is expected to join the board of Rane Holdings shortly.
“After RHL made the preferential allotment to promoters followed by a open offer to the public, the promoter stake had touched 72%. As we did not expect the stake to such a high level and wanted to bring down the holding to around 60%, we looked around for investors.
Blue Metal showed interest in picking up the promoter' stake,” Rane group chairman L Ganesh told ET. He said the PE investment will help in enhancing shareholder value of Rane companies. As a long term investor, Blue River is expected to hold its stake for four to five years, Mr Ganesh added.
Stating this is the first private equity investment which has taken place in the Rane group, Ganesh noted after the current final phase of the consolidation of the holdings of group companies into RHL, to be completed by March 2008, the promoter stake in RHL will stabilise at 45-46%. It has no plans to further dilute stake. Also, the group wants to retain 50% stake in all the companies through RHL.
Blue River is focused on providing expansion and growth capital to family or entrepreneur run businesses. It has about $140 Million under management. “Rane is the best-in-class manufacturer and each of the group companies is a market leader in its domain.
The existing cross-holding structure had been a constraint to capital raising in the past,” Blue River MD Muneesh Chawla said. ” With the current structuring, the group would be better positioned to address organic and inorganic growth opportunities. Blue River is delighted to partner with the Rane group in their quest for excellence,” he added.
Post consolidation, Rane Holdings will emerge stronger as a holding firm and become a vehicle for raising capital for the group's new ventures in the future. Its equity will go up from 9.8 crore to 14.5 crore with a significant net worth.
Currently, RHL holds 54% in Rane Madras, 52% in Rane Engine Valves, 79% in Rane Diecastings, 43% in Rane Brake Linings, 36% in Kar Mobiles and 100% in Rane Investments. RIL will be merged into RHL. Currently, RIL holds 50% stake each in Rane NSK and Rane TRW. The market capitalisation of the five listed companies of the group before the sub-prime crash was Rs 1,095 crore.
Source: Economic Times