Mumbai: Morgan Stanley Private Equity Asia (MSPEA) announced on Tuesday that it has picked up a minority stake for Rs182 crore in Mumbai-based castor oil maker Biotor Industries Ltd.
The deal, in which was consultancy PricewaterhouseCoopers acted as Biotor’s financial advisor, is MSPEA’s first transaction in India. The company did not disclose the size of the stake.
MSPEA is the Asian private equity arm of New York headquartered Morgan Stanley, one of the world’s largest financial services companies.
Going green: MSPEA’s managing director Aluri Srinivasa Rao. Abhijit Bhatlekar / Mint
The investment, which took almost six months to complete since the companies started talks in June, was made from the Asia-focused MSPEA III Fund, which raised commitments of $1.5 billion (Rs7,275 crore at today’s exchange rates) last year.
“The deal took a little longer than anticipated. At that time, we were looking at raising around Rs240 crore,” said Rajesh Kapadia, managing director of Biotor.
But the downslide in the markets since then, combined with the fact that MSPE was getting regulatory approvals in place for India, meant the promoters had to settle for less.
“We were in talks with others as well, but were sure that we wanted Morgan (Stanley) as our partner. Aluri (Aluri Srinivasa Rao, MSPEA’s managing director in charge of India operations) and I have known each other from his days at ICICI Venture (Funds Management Co. Ltd), when we had explored fundraising,” he said
Recent global efforts to replace oil-based chemicals with ecofriendly chemicals has been driving demand for castor oil and its derivatives.
Rao said Biotor was placed to take advantage of the current trend towards green chemicals.
“It is a unique company with strong entrepreneurial vision and value systems, and it has successfully executed its strategy to move downstream into castor derivatives and direct-marketing of its products over the past two years,” he said, adding that Morgan Stanley has deployed about one-third of the Asia III Fund in China in recent months.
Biotor, which posted sales of Rs1,000 crore in the fiscal year that ended in March, is a manufacturer of castor oils and castor derivatives, with operations that span the value chain, from contract farming of castor seeds to wholly owned marketing operations in Europe and the US.
Castor oil is used in a range of products such as lubricants, biofuels, pharmaceuticals, paints, plastics and foam.
MSPEA’s head Chin Chou said in April this year that “2008 represented one of the most attractive times to be investing capital in India and across the wider region”.
Rao said the fund would in India look at opportunities across sectors, including education, health care, infrastructure services, energy and consumer-based industries.
However, private equity activity in India has been relatively slow this year, as falling markets and promoter-investor valuation mismatches have seen deals falling through in the last mile.
Data from Venture Intelligence, a research firm tracking deals, shows that $9.7 billion has come into India by way of private equity and venture capital investments until the end of September, compared with $9.5 billion in the same period a year ago.
However, venture capital has accounted for 35-40% of such investments this year, up from 25% last year, the data showed.