Deal focus: ChrysCapital doubles its money on ING Vysya

The transaction has received shareholder approval and is now awaiting the green light from regulators, which is expected to come later this year.

This is the backdrop to ChrysCapital Partners' decision last week to sell down its 4.5% stake in ING Vysya for $137 million via a series of bulk trades on Bombay Stock Exchange and National Stock Exchange over a two-day period. The PE acquired its interest in the bank nearly four years ago for $69 million.

"We believe Kotak will get to enjoy the benefit of the overall growth in the industry and within the bank itself," explains Ashley Menezes, managing director at ChrysCapital. "However, we think Kotak is fairly valued, so we don't expect the stock will be very accretive, so that is some of the reasoning behind the exit."

This is the second time ChrysCapital has made an exit. ING Vysya was formed in 2002 after the Netherlands-based ING Group acquired a majority stake in India's Vysya Bank. The GP invested an undisclosed amount across two transactions in 2004 and 2005, acquiring a 5% stake which it later exited for more than $28 million in 2009. Despite the economic downturn in India, ChrysCapital decided to return two years later.

"The bank had been consolidating its position in the industry, and while the overall environment in India hadn't been great, it was one of the better-run banks," says Menezes. "So to some extent it has been weathering the storm over the last couple of years.

One of the ways ING Vysa managed to do this was by focusing on the quality of its assets and the sectors it served, and minimizing its risks accordingly. The bank, which currently has 547 branches, 28 satellite offices and 470 ATMs nationwide, reported a profit of INR3.24 billion ($52.5 million) for the six-month period ended September 2014. This is less than the INR3.51 billion for the same period last year but still more than double the 2011 figure.

Overall, the investment generated a 2x money multiple, representing an IRR of 29% in dollar terms., or more if taken in rupee terms. This is ChrysCapital's seventh successful exit from a financial services company - others include Centurion Bank of Punjab, Mahindra & Mahindra Financial Services, UTI Bank, Yes Bank and several Shriram Group entities - and Menezes expects to see many more opportunities in the sector.

"The broad thesis is that the banking sector India is still highly underpenetrated compared to both developed nations and other emerging markets," he says. "If we look at the longer-term trend, banking sector growth has been around twice that of GDP, and that will continue as the environment in India improves."

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• Topics
• South Asia
• Financials
• Exits
• India
• Financial Services
• ChrysCapital Management
• Exit