Mumbai: The the local arm of Australia’s Babcock and Brown Ltd, Babcock and Brown India Pvt. Ltd is shutting its India operations as part of the parent’s global restructuring, a top executive said on condition of anonymity.
The decision follows a 6 February announcement by the Australian Securities Exchange-listed Babcock and Brown that its management will sell assets to reduce the level of its bank debt.
Babcock owes Australia’s five biggest banks about Australian $870 million (Rs2,854 crore). Overseas lenders including Royal Bank of Scotland Group Plc., or RBS, have about A$2 billion on the line, according to estimates by Swiss lender UBS AG, Bloomberg said in a 6 February report. Babcock had borrowed the money to buy ports and property.
Risky partnerships: The London headquarters of the Royal Bank of Scotland. Overseas lenders including the Royal Bank of Scotland may have around A$2 billion on the line, according to a UBS study. Carl De Souza / AFP
The group’s India operations, which were flagged off in April last year, were to focus on investments in infrastructure. Led by Manikkan Sangameswaran, Babcock and Brown India employs 13 executives, eight of whom were hired from ABN Amro Bank NV’s investment banking arm in 2008. ABN Amro has since been bought by RBS.
The restructuring, led by Babcock and Brown’s chief executive Michael Larkin, hopes to “sell down assets in an orderly fashion over a two-three year time horizon,” using “best efforts to treat all employees consistently in terms of paying employee entitlements and redundancy payments,” according to a note put up on the firm’s website on 6 February. Another note four days later does not rule out the possibility of the company being de-listed.
“In all likelihood, India will come under the first round of restructuring, where the smaller offices of Babcock have been asked to close down. But we are waiting for a clarification,” the Babcock and Brown India executive, who is close to the development, said on the phone on Tuesday. “A final decision will be taken by this weekend.”
Babcock is yet to make investments in India. It was expected to invest out of its Asia Infrastructure Fund, which raised $400 million (Rs1,952 crore now) last year to invest in China, Hong Kong, India, Japan, Malaysia, South Korea, Singapore and Thailand.
“We could not raise the targeted $1 billion under the fund after the global financial crisis,” the executive added.
The investment firm had teamed up with Hyderabad-based infrastructure company Nagarjuna Construction Co. Ltd in the second half of 2008 to bid for 14 road projects floated by the National Highways Authority of India, or NHAI.
A Nagarjuna executive said the company had an arrangement for an equity partnership with Babcock and Brown if it won any bids. “We were pre-qualified on a number of projects. But those were found unviable. So, we couldn’t bid for any of them,” he said, asking not not to be named because he’s not authorized to speak with the media.
Babcock and Brown’s Asia head Michael Maxwell, in an interview to Mint on 20 May, had said his fund will be a long-term player in India, undettered by concerns on falling realty prices and rising infrastructure costs. Maxwell later left the fund citing health reasons.
Besides highways, Babcock and Brown was looking at investment opportunities in power, airports and ports, Babcock and Brown’s India head Sangameswaran had told Mint in October.
Rahul Chandran in New Delhi also contributed to this story.