Domestic private equity fund Faering Capital is eyeing a bumper exit from its 5-year old investment in Ratnakar Bank Ltd. (RBL) by cashing out at the proposed initial public offering slated to be launched later this month, said two sources privy to the plans.
Founded by HDFC chairman Deepak Parekh's son Aditya Parekh and his investment banker friend Sameer Shroff in 2009-10, Faering Capital had invested about Rs 100 crore for about 4% stake in 2011 — the first institutional fund raised by the bank — following the induction of the new management team led by veteran banker Vishwavir Ahuja, the MD and CEO.
Faering is among the top five shareholders in the bank and the largest Indian private equity fund along with leading global institutions including IFC, CDC, Norwest, Capvent and Asian Development Bank. At an estimated IPO valuation of Rs 7,000–7,500 crore, Faering’s stake would fetch around Rs 250 crore representing a near 3-fold return on investment.
Analysts estimate, just one exit will help the fund return 40% of its capital back to its investors. This will also help the founding duo of Faering to gain traction for their second fund, estimated at Rs 1800 crore. “Faering will either partly exit its holdings or sell the full stake. A decision is expected to be made in a few days,” said a person with direct knowledge of the fund’s plan. The other investors too may follow suit.” When contacted, a Faering spokesperson declined to comment on the story.
The Kolhapur-headquartered bank, which turned to Bank of America's former India chief Vishwavir Ahuja to breathe new life into its operations in 2010, finally got a nod from the regulator Sebi last month for an IPO after months of delay. Once launched, it will be the first bank IPO in India after a decade.
The IPO’s draft documents filed with Sebi said RBL Bank planned to raise a total of Rs 1,100 crore from investors through its listing. However, last year, it raised about Rs 488 crore from global private equity funds such as ADB and the UK government’s development finance arm CDC Group Plc and a clutch of long-only funds such as DVI Fund (Mauritius) Ltd and Rimco (Mauritius) Ltd.
Following that, the IPO size was reduced to Rs 600 crore. “The management team has put in enormous effort into modernising the bank, its technology and brand, which has led to a 10X growth in its balance sheet in just 6 years,” said an official in the know. “RBL has been Faering’s first investment and arguably the most successful so far.”
The fund is now looking to raise a total of Rs 1,800 crore in its second fund with rupee as well as dollar investments. A first close of around $100 million is expected by August, another source with knowledge of the plan said.
In 2010, Faering raised Rs 800 crore from domestic investors including business groups and private institutions. Till date it has made 15 investments for minority stakes in a diverse set of companies across financial services, consumer and healthcare. They include ladies apparel maker Biba, private banks like City Union, National Stock Exchange, NBFCs like M&M Financial and hospital chains like Manipal, besides RBL. Typically they deploy $10-$30 million in each of their investments.
