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Bain Capital to buy 10% in L&T Finance Holdings for $200 million
MUMBAI: US private equity firm Bain Capital has agreed to invest about $200 million in L&T Finance Holdings through a combination of primary and secondary transactions, marking the Boston based fund's first bet in India's financial services sector.
Bain, which manages $75 billion globally, will buy a combined 10% in L&T Finance, helping the infrastructure lender in expanding its operations. As part of the transaction, L&T Finance will issue 3,18,36,971 equity shares (1.75% of equity) at Rs 74 per share to BC Investments VI and 6,38,20,990 warrants (3.51%) at Rs 74 per warrant to BC Asia Growth Investments.
This would be approximately a 7.6% premium to its closing price on Friday. This primary infusion will bring in Rs 708 crore to the company, L&T Finance said in a statement.
The warrants may be exercised by Bain Capital within 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 said.
Separately, Bain has bought 8.5 crore shares (near 5% stake) at Rs 70 a piece from the parent, Larsen & Toubro through an open market purchase. Bain has invested about $1.6 billion in India through four transactions, including a $1-billion buyout of IT services firm, Genpact, and another $550 million in largest motorcycle maker, Hero MotoCorp.
Bain is likely to get a seat on L&T Finance's board post the conversion of warrant, said people with direct knowledge of the matter. Bain Capital declined to comment.
The funds would be used for the growth capital purposes of L&T Finance, which expects to grow at a compounded rate of 25% over the next 3 years, L&T Finance President N Sivaraman told ET.
"The transaction will essentially help us to ensure that the growth is not hampered because of capital non-availability.
The deal will take care of our capital requirements till FY18," he said. Kotak Securities forecasts a 24% loan growth for L&T Finance to Rs 56,500 crore in FY16 largely led by the infrastructure finance business and housing, microfinance and two wheeler loans in the retail business.
Order flow growth for the infra sector is likely to revive in FY16-17, Bank of America-Merrill Lynch said in a note on September 8. "Sales growth of infra companies and government capex are witnessing gradual signs of a revival," it said.