M.S. Dhoni, India’s cricket captain, has recently bagged an advertising contract of Rs. 210 crores for a period of 3 years. This works out to an amount of Rs. 70 crores per year.
In the case of SKS Microfinance Limited, Narayana Murthy backed Catamaran PE (private equity) fund was roped in as a Pre-IPO investor. The shares were issued to Catamaran PE fund at a price of Rs. 300/- per share and the total investment was Rs. 28.13 crores. The deal has happened on 19-January-2010.
In the recently concluded IPO of SKS Microfinance, the IPO price was fixed at a price of Rs. 985 per share.
At this price of Rs. 985 per share, the notional value of Catamaran's investment goes upto Rs. 92.37 crores, indicating a Mark-to-Market profit of about Rs. 64.24 crores. That too in a period of just 6 months. Of course, as this investment is a pre-IPO investment, there will be a lock-in period of one-year from the date of IPO. Nevertheless, on the basis of the IPO price, the Mark-to-Market profit is about Rs. 64.24 crores.
So, the amount Dhoni has managed for a period of one year for his brand image, Narayana Murthy was able to get for a period of 6 months itself. To put in other words, Narayana Murthy is able to manage two times faster strike rate in comparison to Dhoni.
This particular pre-IPO deal also suggests that the ultimate returns in the investment field depends, besides the traditional factors (such as P/E multiples, profit margins, DCF, growth rate assumptions, etc), largely on the name and the credibility of the investor also.
Cricket is a big-money churner in India. However, for credible investors, even capital markets are highly rewarding. Congratulations, Narayana
—The author is Equity Head, SMC Capitals Limited