Hyderabad: The private equity (PE) arm of global bank Standard Chartered Plc. will invest Rs200 crore to buy a 10% stake in Hyderabad-based construction and infrastructure firm Ramky Infrastructure Ltd, two senior Standard Chartered officials who did not want to be identified said. The deal values the firm, with Rs1,500 crore of annual revenues, at Rs2,000 crore.
One of the two officials said the PE firm has “agreed to invest some Rs200 crore in the infrastructure firm in tranches, based on certain future profit milestones”.
Standard Chartered PE will become the fourth institutional player to invest in Ramky Infrastructure. International Finance Corp., Infrastructure Leasing and Financial Services and Sabre-Abraaj Capital had invested around Rs140 crore for a 14% stake in the company in December 2006, valuing it at around Rs1,000 crore.
On 4 June, Singapore-based PE fund Standard Chartered IL&FS Asia Infrastructure Growth Fund picked up a 4.45% stake in Ramky Enviro Engineers Ltd, a waste management company of the Rs2,500 crore Ramky Group, investing Rs200 crore and valuing it at around Rs4,400 crore.
Ramky Group chairman A. Ayodhya Rami Reddy admitted that Ramky Infrastructure has entered into an arrangement with a leading global PE firm to raise around Rs200 crore in a structured deal. However, he refused to name the firm, citing a confidentiality clause.
Ramky Infrastructure plans to use the money it has raised for working capital to execute projects on hand, Reddy said. The firm has some Rs8,000 crore of orders on hand in waste water, irrigation, roads and power.
Ramky Infrastructure operates in two principal business segments: construction and development. It expects to end this fiscal with a turnover of Rs2,400 crore and a net profit of some Rs150 crore against revenue of Rs1,500 crore and a net profit of Rs70 crore in the fiscal to March 2009, Reddy said.
“Finding that the mining sector offers huge opportunities, we have decided to enter this segment. We plan to take up an array of mining that includes coal and metals, both ferrous and non-ferrous,” Reddy said. A couple of expansions too are on the anvil.
“Based on the experience gained in offering contract services in the mining sector, we plan to begin owning mining assets, both in the domestic and overseas markets. However, the focus would be more on the overseas market, especially on African countries, where we have already incorporated a company,” said Reddy.
To add value to its construction business, the company is also planning to take up manufacture of building materials such as doors, hinges, aluminium frames and floor finishings, among others, he said. To begin with, the firm plans to invest some Rs100 crore in both ventures and scale up operations.
On funding the new initiatives, Reddy said the firm has adequate internal accruals and would also deploy a portion of the fresh funds of Rs200 crore now being raised from Standard Chartered PE. Reddy also said he would later sell shares in the primary market to raise money and offer an exit route to existing institutional investors.