Mumbai: Steel coil and sheet maker Shree Precoated Steels Ltd, or SPSL, plans to sell 10-15% of its stake to a private equity fund to raise about Rs700 crore, said its managing director R.S. Ajmera.
The publicly traded company is talking with potential investors including ICICI Venture Ltd, said an investment banker associated with the deal, who did not want to be identified.
Raising funds: Shree Precoated Steels managing director R.S. Ajmera.
The deal size is not yet finalized, but a company executive who did not want to be named said the money raised could be Rs800-900 crore.
The company expects to close the deal by end of May. DSP Merrill Lynch Ltd’s investment banking unit is advising the firm.
SPSL’s promoters currently own 62% of its stake. Foreign institutional investors own 12%, with Citigroup Global Markets Mauritius Pvt. Ltd holding 1.18%, Merrill Lynch Capital Markets Espana SA 1.9%, and Passport Capital Llc. 4.9%. The company has a market capitalization of around Rs2,317 crore on the Bombay Stock Exchange.
SPSL is part of the Mumbai-based Ajmera Group, which owns a commercial and residential property development business in the city. The group’s land bank is held under SPSL, after a merger of its real estate and steel businesses.
The company is yet to announce its financial results for the fiscal year that ended on 31 March. It had reported Rs1,386 crore net revenue in fiscal 2007 and a profit before tax of Rs772 crore. In the third quarter ending on 31 December 2007, the company saw a 334% rise in net profit.
SPSL is the latest to join the band of firms tapping into private equity after funds dried up in equity markets. Private equity firms, too, are keen to grab the opportunity in India’s capital-intensive realty business.
India’s benchmark index Sensex has declined 17.5% in 2008 and many real estate stocks are quoting at a much lower price compared with their annual highs.
Mint reported in April that State Bank of India was planning to start a real estate fund with Unitech Ltd. Many large foreign firms have also raised big pools of capital to invest in Indian real estate.
Deutsche Bank AG, which recently launched its real estate investment management business, RREEF Alternative Investments, in India, plans to invest $1 billion (about Rs4,140 crore) in the country’s real estate and infrastructure sectors over three years.
Merrill Lynch and Co. Inc. has raised a Pacific Rim real estate investment fund worth $2.5-3 billion to invest in markets, including India.
GIC Real Estate, an arm of the Government of Singapore Investment Corp., an active private equity investor in Indian firms, is also looking at the country’s real estate sector.
A late-2007 study of global trends in the real estate private equity industry by audit and consulting firm Ernst and Young predicted $10 billion worth of foreign investment into the Indian realty sector in 12-18 months.