CDPQ bets on CG Consumer as Advent exits with benchmark returns

 CDPQ bets on CG Consumer as Advent exits with benchmark returns

US private equity firm Advent International has divested its stake in Crompton Greaves Consumer Electricals Ltd with benchmark returns even as Canadian pension fund CDPQ joined the Indian company’s cap table.

Advent International Wednesday sold its entire 5.36% stake in Crompton Greaves Consumer for Rs 1,348 crore ($185 million), fully checking out of a company it first backed five years ago.

Nearly two dozen institutional investors acquired shares from Advent. These include Caisse De Depot Et Placement Du Quebec (CDPQ), Canada’s second-largest pension fund, as well as Indian mutual funds and insurance companies.

Ashoka India Opportunities Fund, a hedge fund established by former Goldman Sachs executive Prashant Khemka, was also among the buyers.

This was the fourth sale tranche by Advent since its Rs 1,300-crore investment. The PE firm had agreed to acquire a 22.34% stake in the demerged consumer products business of Crompton Greaves Ltd from Gautam Thapar’s Avantha Group in April 2015. The deal, however, closed in 2016.

Advent had gained joint management control of CG Consumer along with Singapore state investment Temasek, which invested about Rs 700 crore at the same time as the PE firm did.

Advent initially sold a fourth of its stake in December 2019 for nearly Rs 805 crore, followed by another quarter of its stake a year later for Rs 1,069 crore, thereby recovering its principal.

It sold a third tranche of shares in February this year for Rs 1,491 crore.

In all, Advent fetched Rs 4,714 crore by selling its stake in tranches and benefitting from the steady increase in CG Consumer’s stock price.

Advent stands to score 3.65 times return on its five-year investment and an internal rate of return (IRR), or annualized return, of 30-32% in rupee terms, as per The Capital Quest’s estimates.

PE and venture capital firms typically chase about 20-30% returns in local currency terms.

An email query sent to Advent seeking its comment on the returns estimates did not yield a response till the time of publishing this report.

Shares of CG Consumer Electricals advanced 5.11% on the BSE on Wednesday to close at Rs 425.05 apiece. The stock has touched a high of Rs 455.60 and low of Rs 217.40 over the past 52 weeks.

CG Consumer makes products ranging from fans, pumps and household appliances such as geysers, mixer grinders, toasters, irons and electric lanterns. It was demerged from Avantha Group’s Crompton Greaves as part of a plan to segregate two different businesses—power, industrial and automation, and the consumer products business.

The Capital Quest