Lighthouse nearly triples money in part-exit as Sixth Sense buys into Stylam

 Lighthouse nearly triples money in part-exit as Sixth Sense buys into Stylam

Mid-market private equity firm Lighthouse Funds has trimmed its holding in Stylam Industries via a secondary transaction where consumer-focused venture growth investor Sixth Sense Ventures added the company in its portfolio.

Lighthouse sold a stake of over 4% in Stylam, which makes laminated sheets for homes and offices, on Tuesday for Rs 65 crore ($8.7 million), thereby taking out almost its entire principal investment in the company.

The PE firm had originally bet on Stylam in 2017 and hiked its holding in two tranches in 2018 and 2020. In total, it is estimated to have invested around Rs 65-70 crore to pick up a 13.6% stake in the company.

Based on the first-in-first-out methodology, Lighthouse has churned out almost three times the money it invested after factoring in a stock split early this year. This translates into a realised internal rate of return (IRR), or annualised return, of over 40% without adding dividend earnings, as per The Capital Quest’s estimates. This is above the 20-30% IRR that PE firms chase on an average.

Lighthouse’s remaining stake is worth Rs 157 crore after Stylam’s share price rocketed nearly 10% on Tuesday in a weak Mumbai market.

Lighthouse partner Sachin Bhartiya represents the PE firm on Stylam’s board.

Stylam, which has a factory at Panchkula in Haryana, makes high-pressure laminates, door skin, adhesives, exterior cladding and exterior floor boards. It has a presence in over 60 countries with offices in the UK, Australia, Spain, Portugal, Thailand and the Netherlands.

The company’s net sales rose just 3% to Rs 475 crore for the year ended March 31, 2021 but it saw a significant improvement in its bottom line with the net profit tripling to Rs 55 crore in the same period.

Sixth Sense Ventures

For Sixth Sense Ventures, which is on the road to raise Rs 900 crore for its third fund, this is one among nearly half a dozen transactions it has sealed this year.

The VC firm already counts Parag Milk that it backed in April as a portfolio company under both its second and third funds, as per its website. It has backed Stylam from the new fund.

Founded by Nikhil Vora, a consumer sector specialist, Sixth Sense Ventures has struck at least two other transactions this year. These are diaper maker Nobel Hygiene and direct-to-consumer fresh food label Fraazo.

It is also believed to have bet on healthy snacks brand Open Secret. It is not clear if all these deals are warehoused under the new fund as it is yet to make a formal first close.

Vivek Sinha

The Capital Quest