Jacob Ballas Capital India, the private equity investment fund has invested Rs 100 Crores ($20.29 million) in engineering infrastructure firm DBM Geotechnics and Constructions Pvt. Ltd for a significant minority stake. DBM is an engineering firm, engaged in procurement and construction services, mainly in foundation engineering and marine infrastructure construction. Sunil Chawla, partner, Jacob Ballas Capital India Pvt. Ltd. said:
“DBM has carved out a niche for itself in the geotechnical investigations and foundation engineering businesses. While these two verticals will continue to aid infrastructure growth in the country, the engine of growth for DBM in the years ahead will be marine infrastructure construction, given the amount of activity being witnessed, both at the major and non-major ports.” Chawla will be joining DBM as a board representative from the private equity fund. DB Mahajan, chairman and managing director at DBM, said: “We are delighted to induct NYLIMJacob Ballas as a partner and with this DBM has achieved one more growth milestone. We believe NYLIM-JB’s understanding of the Indian infrastructure sector and global best practices will help DBM to expand business to new heights and create value for all stakeholders.” NYLIM-JB is the IIIrd fund of the New York Life Investment Management handled by Jacob Ballas Capital. Till date, the fund has invested in 24 companies in a diverse range of sectors including telecom, ports, power, engineering construction, shipbuilding, auto components, IT consulting, general manufacturing, pharmaceuticals, financial services etc. Some of the earlier investments by the fund include Bharti Airtel, Gujarat Pipavav Port, Punj Lloyd, ABG Shipyard, Reliance Infrastructure, Bhilwara Energy, Club Mahindra Holidays & Resorts, Financial Software and Systems, SEW Infrastructure, Vivimed Labs and Religare Finvest. Jacob Ballas Capital’s portfolio strategy in India is focused on investing in growth oriented blue chip’ companies which are market leaders and have a strong competitive position in the industry. The PE firm has a ticket size of $15-60 million per investment with an average holding period of three to five years. Yes Bank was the sole arranger for the transaction.
India has 12 major Ports and 185 minor ports along the 7,517 km long Indian coastline which offers varied opportunities for infrastructure development. The government has now added port development projects under the automatic route for. Moreover, public - private partnerships are seen by the government as being key to improving ports. For promoting the marine construction industry, the government has identified so-called, Exclusive Economic Zones (EEZ) which have an area of 2.3 million square kilometres comprising0.86 million square kilometres. on the west coast, 0.56 million square kilometres. on the east coast and 0.6 million square kilometres. around the Andaman and Nicobar islands. Additionally, there is an opportunity to extract energy from tidal waves and water currents which is a clean fuel
and might be a replacement to coal based power plants in the near future. Recent PE funding in port infrastructure include Ascent Capital’s $45 million investment in Karaikal Port in 2011 (which lso raised $35 million from IDFC Project Equity in 2010) and Eton Park Capital’s investment of $125 million in JSW Infrastructure.
A foundation is defined as that part of the structure that supports the weight of the structure and transmits the load to underlying soil or rock. The performance of the foundation engineering industry is governed by the overall performance of he landbased construction industry.
According to Holcim, by 2020, the Indian construction market will replace Japan as the third largest, after China and the US. According to India’s twelfth Five Year Plan (2012-17), the two segments most mportant to construction activity are infrastructure and housing. Since infrastructure spending is expected to go up to 9% of gross domestic product (GDP) or $1 trillion for the plan period (2012-17), this should translate into double-digit rowth for the derived demand segment of foundation engineering.
Headquartered in Mumbai and named after its founder Mr. DB Mahajan, DBM Geotechnics and Constructions Pvt. Ltd. was set up in 1990 as a Geo-Technical investigating agency. DBM has executed over 3,000 projects in India. Leveraging on its xperience and first-hand knowledge of geotechnical strata, DBM moved into foundation engineering in 2004 and then into orts and marine infrastructure construction in 2008. DBM employs about 440 people and operates about 175 rigs for drilling nd piling operations, with capability to drill up to 1,200 meters below the surface level. The company has a soil chanics aboratory and an engineering workshop at Taloja, Navi Mumbai.
Presently the company works under three main business verticals - foundation engineering, marine infrastructure construction and geotechnical services. In foundation ngineering, DBM is mainly into piling, micro piling, pre-stressed rock anchoring and drilling, and grouting. In the field of marine infrastructure construction, DBM is equipped in construction of berths and jetties, diaphragm walls, dolphins, block-wall jetties, breakwaters and supporting infrastructure. The geotechnical services offered by DBM include marine and non-marine geotechnical investigations, topographic and hydrographic surveys, mineral exploration and ground improvement services. The clientele of DBM includes BARC, MMRDA, NTPC, Department of Atomic Energy, Port Trusts like JNPT, MbPT, NMPT,
and KPT among others.
Major competitiors of DBM in the field of Marine Infrastructure Construction are Essar Projects, AFCONS Infrastructure td., and COMACOE Ltd. n
The DealGlobal growth equity firm, General Atlantic (GA), has invested ` 3,500 million (Primary infusion) into Fourcee nfrastructure Equipments Pvt Ltd, a Mumbai based logistics company. The PE firm has acquired a minority stake in the company throughcompulsorily convertible preference shares. The logistic company had earlier raised capital, in 2010, from India Equity Partners (which invested ` 1,050 million), Mayfield (which invested ` 350 million) and SIDBI Venture Capital. General Atlantic has also acquired the entire stake of Mayfield in Fourcee. Avendus Capital provided financial advisory
for the transaction. Wadia Ghandy (Bangalore) was the legal counsel to General Atlantic; Alliance Legal (Mumbai) represented Fourcee Infrastructure Equipments and Economic Law Practice (Mumbai) represented Mayfield in the deal. As a logistics company focused on liquid cargo, Fourcee Infrastructure Equipments specializes in the business of moving non petroleum oil and lubricants through containers on rail versus moving liquid cargo through containers on road. The funds raised in this round will be utilised primarily for acquiring strategic operating assets and to help the company capture higher supply chain efficiencies. Ranjit Pandit, Managing director and Tariq Ahmed, Vice President, General Atlantic
will join the board of directors at Fourcee.
As per estimates, rail freight accounts for approximately 25% of the total freight traffic in India. The share of rail freight, however, is gradually declining. From over 35% a decade ago, it has dropped to the current levels. With improvement in road connectivity and infrastructure, the eroded share of rail freight has gone mainly to truckers, which account for over 70% of all cargo that moves in the country. Industry experts believe that populist politics and coalition pressures on the government have taken its toll on rail freight charges. Instead of a balanced increase in passenger and freight charges, the railways have only increased freight charges over the last decade. This has not only increased rail freight costs inequitably but also adversely affected development required in rail infrastructure. Other specific costs related to rail cargo, such as having a stockyard at both ends, tracking goods in transit, arrangement of transportation to and from the rail terminal also
increases cost and time to the shipper. In 2011, the logistics sector attracted 20% more capital from PE funds as compared to 2010. This sector is estimated to grow at 15-20 per cent annually for the next 3-4 years, with a total market size of $385 billion by 2015, according to a Cushman and Wakefield report. The report also expects that around 110 logistics parks with over 3,500 acres of space would come up by 2012, at an estimated cost of $1 billion. The 2011-12 budget extended infrastructure status to storage and transportation facilities, which coupled with recent investments in the logistic mega parks by government, have made the sector a favourable investment option. Allowing
private container trains and terminals have also contributed to the favourable investment activity in the sector. dditionally with the GST expected to roll out soon, the sector has reasons to cheer. The logistics sector has also witnessed considerable shift in the business model of various freight players. Companies have begun to realize that they cannot just be transporters, and therefore, are becoming asset light, offering more services and have begun to move towards providing third-party logistics. Roads and ports have seen a greater number of investments as compared to other sub-sectors of logistics and infrastructure. PE major 3i’s investment of $61 million in Supreme Infrastructure is the latest case in point of a big ticket investment in the roads segment. In December last year, another Private Equity firm, India Equity Partners acquired road transport operations of TNT Express in India. Chennai based TVS Logistics is also believed to be in talks currently with investors for a second round of funding. Going forward, the cold chain and warehousing segment within logistics is expected to see significant investment because of recent favourable policies of the government.
Fourcee is among the few companies in the country which provide logistic solutions in specialized tank trailers. The company provides an end-toend service all the way from the manufacturer’s location to the drop-off at the consignee’s premises. The firm has seven offices spread across India and one in Singapore. Fourcee also has a JV with India Glycols Pvt Ltd for setting up a private Freight Terminal at Uttarakhand. The company’s key clients include Hindalco, Continental Carbon, Godrej, Reliance Industries, Vedanta Hindustan Unilever and Hindustan Zinc, among others. Fourcee recorded a total income and profit before tax of ` 1,997.9 million and ` 208.8 million respectively for the financial year ended March’ 2011 compared to ` 842.4 million and ` 66.5 million respectively in the year prior to that.
General Atlantic, a global PE major, which manages $17 billion in capital, is known for big ticket investments in India. Since their first investment in Patni, GA has invested close to $1 billion in various businesses in the country. GA’s growth capital is targeted towards industries that cater to the rising consumption of the Indian population. With possibilities of the Indian retail sector opening up to foreign players, the logistics sector is expected to see an unprecedented growth. Fourcee plans to use the fresh infusion of capital to acquire strategic operating assets. “General Atlantic understands the tremendous need for infrastructure development in India and brings to the table a global set of relationships that will be very valuable to us as we continue to expand,” said Rajesh Lihala, Chairman and co-founder of Fourcee. Even though the recent push by the government to allow FDI in multi-brand retail had been put on the backburner due to political constraints, experts believe that the restrictions on FDI in retail will be removed in the near future. The government has made inroads into building a consensus on the issue, and if the proposed legislation on FDI in multi-brand retail goes through, the logistic and infrastructure sector is expected to be the biggest gainer. With reasonable sector valuations and increa sed focus of the government on infrastructure development, the Private Equity industry has taken a renewed interest in businesses operating in the logistics sector.
In a structured transaction, Standard Chartered Private Equity recently invested $70 million in the Mauritius subsidiary of clean energy producer Greenko Group Plc (AIM: GKO.L). The investment in Greenko marks the first investment of Standard
Chartered in Indian renewable energy sector. The investment by Standard Chartered includes a convertible tranche which entitles Standard Chartered to participate in the IPO of any of Greenko’s subsidiaries, and under certain conditions provides Standard Chartered with the right to convert this tranche into the Group’s main holding company shares at a utually agreed internal rate of return. Standard Chartered will enjoy certain minority rights and will get a Board seat on the Mauritius based subsidiary company.
The proceeds from the transaction will be used to support the development of renewable power projects of Greenko in India. Greenko currently has a strong developmental power portfolio of 1.6 GW dominated by hydro and wind assets. The latest funding in the company follows a $50 million investment in October 2011 by General Electric Energy Financial Services which was used for the development of a $115 million wind power project generating 500 MW of power across the country. PE majors likes TPG Capital (invested £21 Mn in 2009), Global Environment Fund (invested US$ 46.26 million in 2009) and Aloe Private Equity are also stake holders in Greenko.
Chief executive and managing director Anil Chalamalasetty said: “We are delighted to partner with Standard Chartered, a leading global bank with a committed focus on sustainable energy investments. This, coupled with their strong presence in India, could provide us with financin gsolutions that could greatly enhance the return profile of Greenko’s project assets and shareholder value.” International business law firm Lawrence Graham LLP (LG) has advised Greenko on the transaction.
Investments from the private equity (PE) and venture capital (VC) community in India’s clean technology sector has witnessed an upward swing during the last year. Some of the largest investments during 2011 included Goldman Sachs’ $220 million investment in ReNew Wind Power Pvt Ltd and GE Capital $58 million investment in Moser Baer Clean Energy Ltd. Over the years, it has been seen that Indian companies rely on established technologies to build their portfolio of projects. Industry experts believe that though some companies are initiating new technologies, the focus on R&D is still lagging behind. Accordingly,
most of the investments that have happened are in the project finance space where established technologies are deployed for renewable power generation.By 2020, the Indian government aims to generate 15% of the country’s electricity through renewable energy sources, which transforms to about 100GW by 2020. To reach that target, around 8-10 GW needs to be added each year in the installed capacity.
As per current scenario, this may seem a challenging task, but the Indian Stakeholders may take inspiration from their Chinese counterparts, which in 2010 added 18.9 GW of new power capacity through wind projects only. The government’s recent initiatives on developing the grid infrastructure into smart grids would make net-metering a lot easier, which
Anil Kumar Chalamalasetty
Founder, CEO & Managing Director
Anil has had an extended entrepreneurial career during which he was involved in evolving start-up businesses in Information Technology, Infrastructure and Environmental sectors in the UK and India. He is experienced in M&A, transition and project management with a successful track record of managing operations involving large remote teams. He co-founded the company in 2004 and incorporated it in early 2006 to raise funds for financing early operations. Anil is a graduate in Computer Science and holds a Masters from North West University.
in turn could significantly increase distribution of power from renewable sources. Growing demand for power across all segments, increased availability of required renewable resources, improved capability of manufacturing renewable energy equipments and sustained pressure from global climate change activists are some of the key growth factors for the booming sector in the country.
Listed on the AIM market of London Stock Exchange, Greenko is a mainstream participant in the growing Indian energy industry and leading operator of clean energy projects in India. The Company’s goal is to reach 1 GW of operational capacity by 2015. Current operational capacity is at 182.6 MW, split between 7 hydro assets of 104.25 MW, 6 Biomass assets of 41.5 MW and 1 Gas/Liquid fuel asset of 36.8 MW along with licensed capacity of 628 MW spread across hydro, biomass and gas. Greenko’s portfolio, which includes projects in the development pipeline, currently stands at 1.63 GW. Based in Hyderabad, the company pre-tax profits
dropped by two-thirds to €3.1 million ($14.5 million) in the
six months period of April-September 2011 on a turnover of €19.8 million (down 23%)
The company hopes to get additional benefits from Standard Chartered’s strong expertise and ability to deploy its balance sheet through debt solutions into its projects. Standard Chartered has demonstrated investment expertise in the renewable space through mobilization of US$ 6.4 billion in debt and equity globally since 2008. The investment by Standard Chartered is partly redeemable at an undisclosed fixed return and partly convertible into equity shares at a fixed rate of return of the Mauritius firm.
Standard Chartered also has the right to participate in the IPO of any of Greenko subsidiaries or any intermediate holding company. In the event that an IPO at any of Greenko’s subsidiaries is not achieved, Standard Chartered has the right to convert the investment into the Group’s main holding company at the mutually agreed internal rate of return. Hence, the transaction will ensure a minimum return to Standard Chartered with upside on the shares getting listed. Analysts believe that company could achieve EBITDA of more than €200 million per year once it starts to generate 1GW annually, which the company aims to achieve by 2015.
Source: Ministry of new and renewable energy, Government of India - http://www.mnre.gov.in/mission-and-vision-2/achievements/
Sources Used:
1. Research PE India Analytics
2. Conversion rate used $1 = ` 45
3. Press Release: http://www.geenergyfinancialservices.com/press_room/press_releases/2011/
web/Greenko.htm
http://www.greenkogroup.com/docs/news/2011/REG_StandardChartered_Investment_2011-
12-15.pdf
4. All images used in the article are copyright © their respective owners
