Mumbai: New York-based private equity (PE) firm Blackstone Group Lp on Monday said it will invest Rs300 crore in Gateway Rail Freight Ltd, a unit of listed port logistics company Gateway Distriparks Ltd.
Blackstone will acquire between 37.27% and 49.90% of Gateway Rail in preferential shares based on certain performance parameters. Gateway Distriparks can buy back the shares at the end of five years from the date of investment or Blackstone can sell it back to Gateway Distriparks at the end of 10 years.
Mint had reported in early September, citing two unnamed Gateway Distriparks executives, that the company was considering selling a stake of up to 25% in Gateway Rail to a PE firm. After the report was published, Gateway Distriparks denied the development in a notice sent to the Bombay Stock Exchange (BSE).
“Gateway Rail will get Rs300 crore upfront from Blackstone. If we are able to match certain performance parameters based on operating profit, Blackstone will be having a 37.27% stake for this Rs300 crore,” Gateway Rail’s chairman and managing director Prem Kishan Gupta said over the phone. “In case we fail to achieve that, Blackstone will hold 49.9% stake for the same amount.” Gupta declined to specify the performance parameters, citing a confidentiality agreement.
Blackstone already owns a 14.99% equity stake in another listed port logistics operator, Allcargo Global Logistics Ltd.
In February 2008, it had taken a 10.38% stake in Allcargo for Rs242 crore and raised it to 14.99% by investing $75 million (around Rs350 crore today) based on the operating profit of Allcargo. Allcargo will be eligible for an extra Rs22 crore if it clocks Rs340 crore in operating profit by 2010.
Gateway Rail’s Gupta said his company will invest Rs300 crore in setting up new rail terminals, expanding existing terminals and buying new container trains and trailers.
Referring to a Rs115 crore advance paid by Gateway Distriparks, Gupta said: “This is fresh issue of shares. At present, we will be using this money for capital expenditure. We will return the advance as and when the business progresses.”
“It is good for Gateway Rail as it could attract an investor at right time and could lock in money for next five years, which is critical in building up assets when the port traffic is showing a revival at present,” said Siddhartha Khemka, equity research analyst at brokerage Centrum Broking Pvt. Ltd.
Shares of Gateway Distriparks fell 5.09% on BSE to Rs126.75 on Monday while the benchmark Sensex rose 2.11%.