Mumbai/Bangalore: Blackstone Group, among the world largest buyout firms, has accelerated its investments in India, pulling off on Monday its second buyout deal in less than three months by picking up a 50.1% stake in Gokaldas Exports Ltd, the country’s largest garments exporter, for $116 million or Rs482.5 crore, and setting aside another $49 million for an open tender mandated under local securities laws for an additional 20% of the target’s shares.
The holding of the promoters in Gokaldas Exports, the Bangalore-based Hinduja family (not related to the Hinduja Group) will come down from 70.1% to 20% before the open offer.
This is the New York-headed private equity investor’s fourth deal in India, after a late-June $200 million buyout of an 80% stake in Mumbai back office services firm Intelenet Global Services Pvt. Ltd.
Blackstone said on Monday that it sees large opportunities in the garments outsourcing business and expects firms from its overseas portfolio and extended network to outsource manufacturing to a 400-acre so-called special economic zone that Gokaldas is setting up at Kanakapura outside Bangalore. “We are associated with a large network of retailers through our global portfolio of investments who may want to outsource to India,” said Akhil Gupta, managing director of Mumbai-based Blackstone Advisors India Pvt. Ltd.
Companies running operations from special economic zones or SEZs enjoy several incentives. The Gokaldas SEZ, expected to employ around 50,000 people, will house units of several garment manufacturers. The company will have a unit that will employ around 4,000 people in the SEZ.
“More companies will outsource (to) us,” said Rajendra Hinduja, managing director of Gokaldas Exports, referring to the benefits of the sale. “We will get access to textile companies in the US that have investments from Blackstone.” The names of such companies were not immediately available. Gokaldas earns more than 96% of its revenue from exports to global brands such as Tommy Hilfiger, Nike and Adidas, and to large retailers such as Walmart Inc. and Gap Inc.
The Bangalore-based garments firm earned a profit of Rs70.3 crore on revenue of Rs1,044.9 crore for the year to March.
Armed with a stake over 70% in Gokaldas, the buyout firm expects to play a more active role in the company than most of its peers in private equity, who typically play the role of financial investors. Gupta said that apart from participating at the board level (Blackstone will have three board positions at Gokaldas), Blackstone will get involved in actively managing the company by adding professionals, bringing in global best practices such as Six Sigma and beefing up the company’s marketing operations in the US.
Blackstone, which will pay Rs275 per share or a premium of 25% for the shares of Gokaldas, had initially prospected the Bangalore target as a ‘growth deal’ with the intention of acquiring a minority stake. Blackstone has invested $525 million, excluding Gokaldas, in India till date and intends on deploying $2 billion in the next two years.
In terms of deal size, Monday’s transaction ranks third in India for Blackstone, whose local portfolio is led by a $275 million investment in media house Ushodaya Enterprises Ltd. The financier invested $50 million in mid-sized drug maker Emcure Pharmaceuticals Ltd in July last year.
Gokaldas employs over 54,000 people in 46 factories and is among the largest employers in the garments business.
Shares of Gokaldas closed at Rs228.70, 1.92% higher, at the end of trading on Monday. The deal was announced after market hours.