Mumbai: A fund managed by JP Morgan Chase & Co has agreed to invest about $400 million in SKIL Infrastructure for a stake of just under 20%, two sources with direct knowledge of the development told Reuters.
SKIL, which controls ship-builder Pipavav Defence and Offshore Engineering Ltd and has a 21% stake in Everonn Education, will use the funds to pare debt and fund its growth, one of the sources said.
Part of the funds will be used by SKIL to repay loans it took to buy about 20% of Pipavav from construction firm Punj Lloyd last year, the source said, adding SKIL will also invest in defence and education.
Pipavav, which is now 43% owned by SKIL, was previously known as Pipavav Shipyard.
Both sources declined to be identified because the deal has not yet been announced. A potential deal was reported in June by The Economic Times newspaper.
Officials at SKIL and New York-based JP Morgan were not immediately available for comment.
As of 31 March, SKIL had total debt of Rs 1,351 crore ($285 million), excluding vehicle loans.
In June, it filed papers for an initial public offering to raise up to Rs 1,125 crore and is awaiting approval from the regulator.
“The company is looking to cut debt significantly, which is a positive sign,” said Dev Kapadia, head of institutional equities at Lalkar Securities.
Pipavav Defence said on Monday it had formed an equal joint venture with state-run Mazagon Dock to build submarines and warships in order to gain access to growing spending by India as it modernises its defense systems.
“The group’s entry into defence sector looks lucrative in a long-term perspective,” Kapadia said.
Arun Kejriwal, strategist at research firm KRIS, said the group’s stepped-up focus on defence is a good idea.
“We need to know more about their execution strategy and delivery skills, because the deliveries haven’t happened,” he said.
Pipavav shares, which rose 11.6% on Monday on investor enthusiasm over the defence tie-up, closed down 3.84% on Tuesday on what traders said was profit taking.
Private equity investment in India rose 21.6% to $3.3 billion in the first half of 2011, according to Thomson Reuters data.
Private equity investments in infrastructure hit $4 billion last year from about $1 billion in 2006, Bain & Company said in a recent report, predicting activity could grow 25-50% a year over the next three years.