Mumbai: British hedge fund Spinnaker Capital Group is in talks to sell its 25% stake in Hyderabad-based Sanghi Industries Ltd, which owns a 2.6 million-tonne cement plant at Kutch in Gujarat, two people familiar with the development said on Monday.
Spinnaker owns the stake in Sanghi Industries through its three funds—Spinnaker Global Strategic Fund Ltd (6.94%), Spinnaker Global Emerging Markets Fund Ltd (8.06%) and Spinnaker Global Opportunity Fund Ltd (10%).
The Spinnaker Capital Group website says all three funds that purchased stake in Sanghi Industries are closed for new investments.
Sanghi Industries’ shares rose marginally 0.54% on the BSE on Monday to close at Rs27.95, even as the exchange’s benchmark index, the Sensex, rose 3.03%. Ahmed Raza Khan / Mint
The funds acquired their stake in Sanghi in two tranches—an 11% stake in 2005 at Rs10 a share, and then a 14% acquisition through a preferential allotment at Rs18.50 a share—at a total cost of around Rs75 crore.
Sanghi Industries’ shares rose marginally 0.54% on the Bombay Stock Exchange on Monday to close at Rs27.95, even as the exchange’s benchmark index, the Sensex, rose 3.03%. At this price, Sanghi Industries’ market capitalization is Rs382.14 crore.
“We have held talks with the Spinnaker’s fund managers in India and also in Singapore to buy their stake in Sanghi Industries,” said the chief executive of a multinational cement company keen to grow its cement business in India.
He did not want to be identified as negotiations are on and the deal has not yet been struck. “Unless the Sanghi family settles their dispute, we cannot go ahead with the transaction,” he added.
The four Sanghi brothers— Anand, Sudhir, Ravi and Girish—have been fighting for the control of the company and a case is pending before the Company Law Board, which decides on company disputes.
Text messages sent to Spinnaker’s senior executive in India Ravi Agarwal did not elicit any response.
Bina Engineer, chief financial officer and spokeswoman of Sanghi Industries, declined comment.
Apart from the multinational cement maker, Spinnaker is also in talks with a fund to sell its stake in Sanghi Industries, said one of the two persons familiar with the development. Mint couldn’t independently ascertain the identity of this fund.
Spinnaker Capital is reviewing its investments across the globe after Wall Street investment bank Lehman Brothers Holdings Inc. collapsed in September 2008 following the subprime crisis in the US.
Lehman Brothers had acquired a 20% stake in the hedge fund in January 2007.
Spinnakar’s stake sale comes at a time when members of the Sanghi family, promoters of Sanghi Industries, are in negotiations to reach an out-of-court settlement.
“We are hopeful of a settlement and (are looking to) divide all assets among the four brothers. Some friends and well-wishers are helping the family to reach a settlement,” a senior Sanghi Industries’ official said.
The brothers own 51.01% stake in Sanghi Industries.
“The Spinnaker stake sale is not linked to the family settlement,” the same official who did not want to be identified said, adding that Sanghi cement’s expansion plan would depend on the settlement.
The company wants to increase its cement production capacity to 8 million tonnes (mt) a year, but lenders have been loath to lend the company money while its promoters are still jockeying for control.
India’s cement industry, with a capacity of 215 mt, is betting on an infrastructure boom, driven primarily by government spending and the efforts by real estate firms to build affordable homes.
Multinational cement companies want to expand their capacity both by acquisitions and adding fresh capacities. And some private equity funds are keen to fund them.
“We want to double contribution of Indian subsidiary to 8% (of global revenues) in few years and would like to have a capacity of 20 million tonnes,” Lafarge India Ltd managing director and chief executive officer Uday Khanna had told Mint around a week ago.
“Cement and building materials are among the 10 sectors identified for investment in India,” Carlyle Asia Growth Partners’ managing director Shankar Narayanan said soon after he closed a $1.04 billion (Rs5,034 crore today) Asia growth fund this month.
Sanghi Industries had reported a net profit of Rs52.54 crore for the fiscal year ended 31 March on revenue of Rs867.93 crore.
Its stock rose to a lifetime high of Rs107.30 in August 2007, but has fallen substantially since, following the dispute between the brothers.