India: PE firm Clearwater Capital Partners to sell 24% in Jamna Auto

Visual from the company website

Private equity firm Clearwater Capital Partners has hired investment bank ICICI Securities Ltd to sell its 24% stake in auto component maker Jamna Auto Industries Ltd, three persons familiar with the development said, adding that Reliance Capital Asset Management Ltd is among top mutual funds and financial institutions that have shown interest.

A deal is likely at Rs.250-300 crore, the persons mentioned above said requesting anonymity.

The Delhi-based company is an original equipment manufacturer (OEM) of suspension products and lift axles for medium and heavy commercial vehicles (MHCVs). Clearwater Capital Partners holds a total of 28% in the company through two of its funds—Clearwater Capital Partners (Cyprus) Ltd and Clearwater Capital Partners Singapore Fund III Pvt. Ltd.

“Talks are under way and a deal could be completed soon. The transaction is likely to be done at a premium of 15-20% to the prevailing market price of Jamna Auto’s stock,” said the first person.

On Friday, the Jamna Auto stock closed at Rs.231, up 0.17%, on BSE, while the benchmark Sensex rose 0.65% 26,128.2 points.

ICICI Securities did not respond to an email, while a top Reliance Capital MF official declined to comment.

“Clearwater has been invested in the company for over seven years now. They think that this is the right time to look at exiting the investment as the stock has moved up significantly in the last one year,” said the second person, requesting anonymity.

“Talks are happening with institutional investors such as Reliance Capital MF and Birla Sun Life AMC. Several other mutual funds are also interested and are in talks,” he said, adding a deal might be concluded in the next few weeks.

A 23 November research report by domestic broking firm Angel Broking recommended the Jamna Auto stock, saying its revenue is estimated to grow at 14% between financial years 2015 and 2018 on account of an uptick in the MHCV-OEM segment and a ramp-up of new products, which include parabolic leaf springs and lift axles.

Operating leverage, better product mix and savings on energy costs will enhance the company’s margins, the report added.

“We expect Jamna Auto’s earnings to grow at a CAGR of 35% over financial year 2015-2018. The company’s return ratios are also estimated to improve on account of margin expansion, better working capital management and lower gearing,” said the report.

Angel Broking said the MHCV industry is in an upcycle and it will maintain a double-digit growth momentum and clock at least 16% compound annual growth rate between financial years 2015 and 2018. Jamna Auto derives around 70% of its revenues from the MHCV-OEM segment and according to Angel Broking, the company will be a beneficiary of the strong demand.

A mutual fund investment advisory expert said demand for automobile equipment manufacturing companies is likely to go up in the medium to long term, which will drive investments in the stocks of such firms.

At present, mutual funds have a combined asset under management of at least Rs.4 trillion in equities.

“Currently, about 3% of mutual fund assets are allocated in equities of auto ancillary firms. This will definitely go up in the coming days with demands for new technologies increasing in the automobile sector. So, it is imperative for mutual funds to consider taking advantage of the imminent growth in this sector,” said the mutual fund advisory expert on the condition of anonymity.

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This article was first published on Livemint.com

Singapore Reporter/s

In Singapore, we are looking to double our reporting team by this year-end to comprehensively cover the fast-moving world of funded startups and VC, PE & M&A deals. We want reporters who can tell our readers what is really happening in these sectors and why it matters to markets, companies and consumers. The ability to write precisely and urgently is crucial for these roles. Ideal candidates must have to ability to work in a collaborative, dynamic, and fast-changing environment. We want our new hires to be digitally savvy and ready to experiment with new forms of storytelling. Most importantly, we are looking for hard-hitting reporters who work well in a team. Collaboration and collegiality are a must.

Following vacancies can be applied for (only in Singapore).

Following vacancies can be applied for (only in Singapore).   

  • A reporter to track companies/startups that have raised private capital, and have the potential to become unicorns. SEA currently has over 40 companies with a valuation of over $100 million and under $1 billion.
  • A reporter who can get behind the scenes and reveal how funding rounds are put together, or why they’ve failed to materialise. She/he in this role will largely focus on long-format stories. 
  • A journalist to track special situations funds, distressed debt and private credit (from the PE angle) across Asia.

Singapore Reporter/s

In Singapore, we are looking to double our reporting team by this year-end to comprehensively cover the fast-moving world of funded startups and VC, PE & M&A deals. We want reporters who can tell our readers what is really happening in these sectors and why it matters to markets, companies and consumers. The ability to write precisely and urgently is crucial for these roles. Ideal candidates must have to ability to work in a collaborative, dynamic, and fast-changing environment. We want our new hires to be digitally savvy and ready to experiment with new forms of storytelling. Most importantly, we are looking for hard-hitting reporters who work well in a team. Collaboration and collegiality are a must.

Following vacancies can be applied for (only in Singapore).

Following vacancies can be applied for (only in Singapore).   

  • A reporter to track companies/startups that have raised private capital, and have the potential to become unicorns. SEA currently has over 40 companies with a valuation of over $100 million and under $1 billion.
  • A reporter who can get behind the scenes and reveal how funding rounds are put together, or why they’ve failed to materialise. She/he in this role will largely focus on long-format stories. 
  • A journalist to track special situations funds, distressed debt and private credit (from the PE angle) across Asia.