Bain Capital picks up 10% stake in L&T Finance for Rs.1,300 crore

Mumbai: Private equity firm Bain Capital has bought close to 10% stake in L&T Finance Holdings Ltd for a little over Rs.1,300 crore in two separate transactions.

As part of the deal, Bain Capital is investing Rs.708 crore in L&T Finance through the issue of preferential shares and warrants, the company said in a press release to the exchanges. This will translate into 5.27% of the post-issue equity share capital of L&T Finance.

In addition, Bain Capital bought 86 million shares, or 5% stake, in L&T Finance from parent firm Larsen and Toubro Ltd through an open market transaction. The share sale via the exchanges was concluded at an average price of Rs.70 per share, said a person familiar with the transaction, implying a deal size of Rs.602 crore.

“Subject to all necessary approvals, it is proposed to issue an aggregate of 95.66 million equity shares and warrants at Rs.74 per share/warrant, amounting to an infusion of Rs.707.80 crore in the company and constituting 5.27% of the post-issue equity share capital of the company on a fully diluted basis,” L&T Finance said in a statement on Monday.

N. Sivaraman, president and wholetime director at L&T Finance, said the deal will help the company raise capital for its growth needs and also allow L&T to divest some of its holding in the finance firm.

“The primary transaction is of capital raised by L&T finance by diluting a little more than 5% through a primary issuance of shares and by way of warrants. In addition to this, Bain has taken additional exposure indirectly by buying from L&T from the market,” said Sivaraman adding that Bain will effectively hold a little more than 10% following the conversion of the warrants.

The warrants may be exercised by Bain Capital within a period of 18 months from the allotment date or accelerated after six months from the date of allotment, based on the company’s capital requirement, L&T Finance in its press release.

Sivaraman said that the capital-raising will help L&T Finance fund its growth over the next few years.

“As we see it, the decisions that have been taken by the government, should help the economy return to 8-9% growth. This, in turn, will help us grow our balancesheet. A CAGR (compounded annual growth rate) of 20% over the next three years seems quite likely,” he said.

Following the deal, L&T will reduce its stake in L&T Finance to about 62.5% following the conversion of the warrants. L&T so far held 72.5% in its finance subsidiary.

At 1.15pm, L&T Finance Holdings shares were trading 3% lower at Rs.66.55 on BSE. The benchmark BSE Sensex was trading at 26,178, down 0.16%

Bain Capital, an active investor in listed entities, invested $550 million in Hero Investment Pvt. Ltd in March 2011. The money—a part of Rs.4,000 crore that the private equity firm invested along with Lathe Investment Pvt. Ltd, a unit of Government of Singapore Investment Corp. Pte Ltd—was used by the Munjal family-controlled Hero group to acquire Honda Motor Co.’s 26% stake in Hero Honda Motors Ltd, since renamed Hero MotoCorp Ltd.

In November 2014, Bain Capital sold a 4.27% stake in Hero MotoCorp for $400 million. It now has a 1.5% stake in the company.

Disclaimer: This information has been collected through secondary research and IBEF is not responsible for any errors in the same.