Sintex in talks with TPG, Blackstone, Carlyle to sell stake in Sintex Plastics
TPG Capital, Blackstone Group, Carlyle Group have shown interest in Sintex Plastics, which makes water tanks, to pick up a minority stake worth $200 million
Mumbai: Sintex Industries Ltd, the world’s largest maker of plastic water tanks, is in talks with private equity (PE) funds to sell a minority stake in its newly demerged entity—Sintex Plastics Technology Ltd, according to two people aware of the development.
TPG Capital, Blackstone Group LP and Carlyle Group have shown interest in the company and separate discussions are on to sell a minority stake worth $200 million (Rs1,300 crore), said one of the two cited above, requesting anonymity.
Last September, Sintex Industries’ board approved a plan to separate its non-textile business under Sintex Plastics and subsequently list the separated firm on BSE and National Stock Exchange this year. In FY16, about 74% of Sintex revenue was generated from its plastic business. Sintex had posted a revenue of Rs7,734 crore in FY16. Investec Capital Services is advising Sintex on the stake sale.
A Sintex spokesperson said the information is wrong, without elaborating further. Spokespersons for TPG and Blackstone declined to comment. Mails sent to Carlyle and Investec spokespersons went unanswered.
“For the PE funds, it’s a good opportunity to be part of the potential growth of Sintex plastic business. The listing will automatically open a exit route in future,” said the second person cited above on condition of anonymity.
The Sintex board had approved the demerger of the custom moulding business and the prefab business from Sintex Industries to Sintex-BAPL and Sintex Infra Projects, respectively. The two entities are wholly owned subsidiaries of Sintex Plastics.
“Custom moulding business, including prefabricated and monolithic housing, is a high-capacity and low-utilization business. It will be cash positive with the demerger of the business. The impetus provided to housing sector in the form of EWS (economically weaker section) housing and incentivizing through lower interest rate would be of great help in pushing custom moulding business,” said a January report on Sintex by Karvy Stock Broking Ltd.
After the demerger, the textile business will remain under Sintex Industries. Sintex cited value unlocking as the reason for the demerger. The demerger will deleverage the plastic side of the business which will generate free cash flow and higher return on capital employed, according to the company management.
Established in 1931 as a textile firm, Bharat Vijay Mills Ltd entered into plastic manufacturing in 1975 with making plastic moulded polyethylene liquid storage tanks including water tanks. In 1995, the company was renamed Sintex Industries Ltd.
Besides the production of water tanks, Sintex also manufactures pre-fabricated structures for classrooms, booths, kiosks and office rooms. Sintex has expanded overseas through a series of acquisitions including Wasaukee Composites Inc. in the US and Nief Plastic, a European group with headquarters located in France. It also acquired a 74% stake in the Indian unit of Zeppelin Mobile systems Ltd of Germany.
Funds such as TPG and Carlyle are active investors in the growing consumer space in India.
Last week, Carlyle invested $100 million in Delhivery Pvt. Ltd, a supply chain services firm, along with Tiger Global, one of the existing investors of Delhivery. Carlyle Group has emerged as the frontrunner for GE Capital Corp.’s stake in SBI Card, the credit card joint venture between the US-based firm and India’s largest lender State Bank of India (SBI), in a deal worth $325 million, a 22 March Mint report said.