Black­stone Plans Son­alika Stake Sale

Ropes in four in­vest­ment banks to help trac­tor co with .₹ 2,000-cr IPO; PE firm plans to sell half of its hold­ing in the of­fer

The Economic Times - - Companies: Pursuit Of Profit -

In­du­lal PM & Ke­tan Thakkar

Mum­bai: Af­ter in­vest­ing $1.1 bil­lion in IT ser­vices firm Mpha­sis a fort­night back, Black­stone, the world’s big­gest pri­vate equity fund, is gear­ing up for a multi-bag­ger exit by sell­ing shares in one of its port­fo­lio com­pa­nies.

Son­alika In­ter­na­tional Trac­tors Ltd (STIL), backed by the New York­head­quar­tered in­vest­ment firm, is look­ing to raise as much as .₹ 2,000 crore through an Ini­tial Pub­lic Of­fer­ing (IPO). Black­stone has roped in four in­vest­ment banks, in­clud­ing Gold­man Sachs Inc, to help them with the list­ing, mul­ti­ple sources with di­rect knowl­edge of the mat­ter told ET.

SITL, the third-largest trac­tor maker in In­dia and which sells un­der the Son­alika brand, has also hired Ko­tak Se­cu­ri­ties, JM Fi­nan­cial and ICICI Se­cu­ri­ties as book run­ning lead man­agers for the is­sue.

The pub­lic of­fer, ex­pected to be among the big­gest this fis­cal, is lik- ely to launch in the sec­ond half of this year, sources said. The is­sue will see all ma­jor share­hold­ers di­lute their equity par­tially to of­fer up to 20% to new in­vestors, at a .₹ 10,000 crore val­u­a­tion.

Black­stone had in­vested about $100 mil­lion for a 12.5% stake in SITL in 2012, and in­creased it to 17.5% later, while Yan­mar Asia, a Ja­pan-based agri­cul­ture equip­ment maker, has picked up an­other 12.5% in the com­pany. The founders, led by chair­man Lachh­man Das Mit­tal, own the resid­ual 70%.

The largest chunk that will be made avail­able in the IPO will come as an of­fer for sale from Black­stone, which is ex­pected to make a par­tial exit of nearly half of its hold­ing. Yan­mar and the com­pany’s pro­moter group are yet to de­cide on the ex- act quan­tum of stake di­lu­tion, said one of the sources men­tioned above. The pri­vate equity fund is likely to tre­ble its re­turn from a four-year old in­vest­ment. When con­tacted, Black­stone, Gold­man Sachs and ICICI Se­cu­ri­ties de­clined to com­ment. Ko­tak and JM Fi­nan­cial did not im­me­di­ately re­turn an email seek­ing com­ment till press time.

AS Mit­tal, vice-chair­man of Son­alika Group of Com­pa­nies, told ET that the list­ing pro­posal is be­ing con­sid­ered but it is too pre­ma­ture to com­ment on.

“Broadly speak­ing, the com­pany is sit­ting on cash re­serves of close to .₹ 1,800 crore and there’s no need to raise funds right now. Black­stone is a pri­vate equity in­vestor: they in­vest, cre­ate value, earn re­turns and exit. That is their na­ture of busi­ness. To pro­vide them an exit, the board may dis­cuss an IPO route,” said Mit­tal.

If suc­cess­ful, Black­stone will make its sec­ond exit in a span of six months af­ter it sold part of its hold­ing through the IPO of spe­cialty

Black­stone had in­vested about $100 mil­lion for a 12.5% stake in SITL in 2012, and in­creased it to 17.5% later

chem­i­cals maker SH Kelkar. Since 2005, it has in­vested over $5.1 bil­lion in In­dia across its pri­vate equity and real es­tate prac­tice.

Son­alika Trac­tors, founded by Mit­tal when he was 65 af­ter re­tir­ing as a zonal man­ager of state-run LIC, has been the fastest grow­ing brand in the trac­tor space in the country and has seen over 400 bps in­crease in mar­ket share over the past three years to the cur­rent 12%.

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