US-based private equity giant Blackstone Group will invest $150 million in
Hyderabad-based construction group Nagarjuna Construction Company Limited, ranked
as the third largest construction firm in India.
to invest in Nagarjuna Construction is based on expectations of government and
private spending in infrastructure projects in India rising to keep pace with
demands of a booming economy.The Planning Commissionhas projected
in infrastructure to top $470 billion in the next five years.
is the fourth investment in India this year by the New York-based Blackstone.
Earlier this month, it reached an agreement to pay up to $165-million to acquire
a majority stake in Gokaldas Exports Ltd, India''s leading garment exporter.
Construction will make a fresh issue of shares and convertible warrants in favour
of Blackstone GPV Capital Partners Mauritius V-A Ltd, Blackstone FP Capital Partners
(Mauritius) V FII Ltd, Blackstone GPV Capital Partners (Mauritius) V-H Ltd.
funds will invest equity capital in the Company in two tranches. Blackstone will
be allotted 20,246,900 equity shares of Rs.2 each at a premium of Rs200.50 (equivalent
to approximately $100 million) and 9,111,111 warrants, with an exercise period
of 18 months, of Rs.225 per warrant.
warrant is convertible into one equity share of Rs2 each at a premium of Rs.223,
(equivalent to approximately $50 million).
all-equity investment will fetch Blackstone a 12.2-per cent stake in the company
and a seat on the board.
in 1978 by AVS Raju and currently led by his son, A Ranga Raju, Nagarjuna Construction,
through its subsidiaries owns several infrastructure assets on a build-operate-transfer
basis. Its construction services business operates in the road, water, buildings,
electrical works and irrigation segments.
company recently expanded into the power, oil and gas, and metals segments.
Ranga Raju, managing director, Nagarjuna Construction, said "The investment
will not only allow us to make additional investments in public-private infrastructure
projects, but will also expand our capital base, enabling us to bid for larger
projects going forward and strengthening our strategic positioning in the market."
extraordinary general meeting of the members of the company is scheduled for 24
2007, to obtain shareholder approval.
D Murthy, VP, finance, Nagarjuna Construction, told CNBC-TV18 that on a diluted
basis, Blackstone''s stake in the company will be 12.2 per cent post warrant conversion.
He added that, as of now, Nagarjuna had no plans to sell more stake and that there
will be no dilution for the next two years.
said, "They are investing about $150 million, (of which) $100 million by
way of equity shares at Rs202.50 per share, and about $50 million by way of warrants,
at Rs225 per warrant, out of which 10 per cent will be paid after receiving shareholders''
approval, and balance 90 per cent will come as per SEBI guidelines within 18 months.
Murthy, the $150 million flowing into the company will be taken for long-term
projects. He added that currently the company''s funds were sufficient for the
next few quarters and that it would not opt for a QIP with Blackstone''s investment.
He said, "We
were actually earlier planning a QIP for which we got the shareholders'' approval
for $180 million. And now with the private equity tie up with Blackstone, we will
not go for the QIP, and the $150 million that is flowing into the company will
be sufficient to take care of our long-term interest in terms of investment in
BOT projects, power projects and seaport projects.
Investment Banking acted as the investment banking advisors to the Indian company
and SSKI acted for Blackstone in the transaction.