New Delhi, Oct. 16 -- Apollo Global Management, the US-based private equity and credit investor, has made an exit move from a struggling Indian company it backed more than a decade ago through its local joint venture.

New York Stock Exchange-listed Apollo, one of the world's biggest alternative investment firms with assets under management of nearly $700 billion, has sold a 2.57% stake in Jyoti Structures Ltd for about Rs 72 crore ($8.6 million).

The partial exit comes a time when shares of Mumbai-listed Jyoti Structured have tripled over the past year. Shares of the company touched a one-year high of Rs 34.89 apiece on the BSE last week, up from a 52-week low of Rs 10.71 in November last year.

Jyoti Structures was part of the portfolio of AION Capital Partners, a stressed assets and special situations investment firm that Apollo had formed in a joint venture with Indian PE firm ICICI Venture in 2011. Apollo and ICICI Venture ended the JV in 2020. Since then, Apollo has been managing AION's portfolio. (To know more about AION's investments, click here.)

AION Capital invested in Jyoti Structures, an engineering and construction company focused on the power transmission sector, through non-convertible debentures in 2013. This was AION's first investment from its maiden fund that raised $825 million. It invested around $30 million, or about Rs 200 crore at the prevailing exchange rates.

Jyoti's troubles

Jyoti Structures ran into rough weather a few years after AION's investment as its debt ballooned to more than Rs 8,000 crore and it defaulted on its dues. In 2017, the Reserve Bank of India included Jyoti in its list of the "dirty dozen" companies with the heaviest debt burdens. These companies later faced bankruptcy proceedings.

After the RBI list came out, State Bank of India filed an application to start the insolvency resolution process against Jyoti Structures for a default of around Rs 1,600 crore. While the company did receive a resolution plan, it didn't clear the regulatory hurdle. This pushed it towards liquidation.

Subsequently, the National Company Law Appellate Tribunal (NCLAT) set aside the order to liquidate the company. Instead, it asked the National Company Law Tribunal (NCLT) to consider a revised resolution plan of Rs 4,000 crore.

As part of the resolution plan, the company issued 70 million compulsorily convertible preference shares (CCPS) to Apollo at a price of Rs 4 apiece. The CCPS were converted into equity shares last year, translating into a stake worth Rs 28 crore. This was far below the PE firm's principal investment amount, although the sharp price in the company's share price over the past year has helped to cushion the blow.

Following the recent share sale, Apollo retains a 5.3% stake in the company. This is worth around Rs 154 crore at current prices. It couldn't be immediately ascertained whether AION had received any coupon payments on the debentures before Jyoti Structures entered insolvency. If it did receive any such amount and if the share prices remain elevated, it might be able to eke out a profit on its investment.

Still, Apollo's annualised returns from the 11-year-old investment will likely be far below the minimum 20% that PE firms typically chase in rupee terms at the fund level.

Email queries to Apollo Global didn't elicit any response till the time of writing this article.

On a positive note, Jyoti Structures recorded an improvement in key metrics for the financial year ended March 2024. It posted a net profit of Rs 29 crore for FY24, after reporting a net loss in the previous years. For April-June 2024-25, net profit more than doubled from a year earlier to Rs 5 crore.

Apollo's recent India activities

Apollo Global is one of the world's biggest alternative asset managers. It has offices in New York, Los Angeles, London, Frankfurt, Madrid, Mumbai, New Delhi, Singapore, Hong Kong, Shanghai and Tokyo, among other cities. The PE firm had assets under management of $696 billion as of June 30, 2024.

The buyout firm has been investing on its own in India since 2020 after scrapping its joint venture with ICICI Venture. However, it has invested in only a handful of companies since then.

Last year, it invested Rs 200 crore ($24.2 million) in real estate developer Anant Raj Ltd via non-convertible debentures. In May 2022, it bet $750 million via its credit funds on billionaire Gautam Adani-led diversified conglomerate Adani Group's Mumbai airport unit.

In February 2022, Apollo committed to invest $125 million in Hero FinCorp Ltd. In July 2021, Apollo joined hands with Synergy Capital to invest $100 million each in JSW Cement via a structured equity deal.

Apollo is now looking to monetize its investments in both Hero FinCorp and JSW Cement through their planned initial public offerings. While Hero FinCorp filed its draft IPO documents in late July, JSW Cement submitted its draft red herring prospectus in mid-August. However, the Securities and Exchange Board of India has kept JSW Cement's IPO proposal on hold.

Published by HT Digital Content Services with permission from VC Circle.