Mumbai/Bangalore: SKIL Infrastructure Ltd, the original promoters of Pipavav Shipyard Ltd, raised its stake in India’s newest private sector shipbuilding company by acquiring the 19.6% equity held by engineering and offshore construction firm Punj Lloyd Ltd on Sunday in a deal worth Rs700 crore.
SKIL Infrastructure will also make an open offer to buy a further 20% of Pipavav Shipyard from public shareholders at Rs61.50 per share to comply with the norms set by market regulator the Securities and Exchange Board of India (Sebi), Nikhil Gandhi, non-executive chairman of Pipavav Shipyard, said in a phone interview from Mumbai.
Changing course: Pipavav Shipyard chairman Nikhil Gandhi.
SKIL Infrastructure, promoted by Gandhi and his brother Bhavesh, is investing Rs1,500 crore to buy Punj Lloyd’s stake and also for buying a further 20% from public shareholders. These two transactions will raise its stake in Pipavav to 59.73% from 20.13% now.
The deal comes barely six months after Pipavav went public, raising Rs500 crore.
In a separate development, Capital International Inc., a global private equity fund, bought a 2.8% stake in Pipavav on Friday from the open market at Rs64 a share, Gandhi said.
SKIL is known for developing infrastructure ventures such as Pipavav Port, Pipavav Railway, logistics and Navi Mumbai and Maha Mumbai special economic zones before selling them to bigger firms.
But with Pipavav Shipyard, there is a shift in strategy.
“By increasing our stake in Pipavav by investing Rs1,500 crore, we are demonstrating our faith in the huge opportunity foreseen in the oil and gas and defence production and defence offset sectors,” Gandhi said.
Punj Lloyd executives were not immediately available for comment. The deal was first reported by The Economic Times on Saturday.
Both Nikhil Gandhi and Bhavesh Gandhi (executive vice-chairman of Pipavav Shipyard) had denied that Punj Lloyd was exiting Pipavav Shipyard when contacted by Mint on 2 March seeking comments on the imminent development.
“We confirm that Punj Lloyd is not exiting Pipavav Shipyard,” Louise Sharma, group head, corporate communication, Punj Lloyd Group, said in an emailed reply on 8 March.
SKIL Infrastructure bought the Pipavav stake from Punj Lloyd for Rs49.80 a share, a 22% discount to the closing price of Rs63.85 a share on the Bombay Stock Exchange on Friday.
The open offer price of Rs61.50 a share disclosed by Gandhi is 24% more than the price paid to Punj Lloyd. The date for the open offer has not been finalized yet.
The investment in Pipavav has fetched good returns for Punj Lloyd.
In September 2007, Punj Lloyd became a co-promoter of Pipavav Shipyard by acquiring a 22.29% equity stake in the yard at Rs27 a share, investing Rs350 crore. Following the share sale in September 2009, Punj Lloyd’s stake in Pipavav dropped to 19.6%.
Mint could not independently ascertain the reasons for Punj Lloyd’s exit from Pipavav. Analysts said the firm was under pressure following its acquisition of Simon Carves UK and SemCorp Engineers Singapore and needed a cash boost to shore up its balance sheet.
“Punj Lloyd may want to stay focused on its core competence to build hard core infrastructure such as roads,” Gandhi said.
SKIL also did not forsee any difficulty in raising funds to buy Punj Lloyd’s stake in Pipavav though its entire equity of 20.13% has been pledged with IL&FS Trust as collateral for loans taken for developing the yard. IL&FS Trust is the security trustee for lenders.
SKIL has given a declaration-cum-undertaking that its equity will remain pledged with IL&FS Trust until the loans are re-paid. “We have the money for buying Punj’s stake and also for funding the open offer,” Gandhi said.