Bangalore: Private equity (PE) firm ICICI Venture, an arm of ICICI Bank Ltd, is looking to exit shipbuilder Tebma Shipyards Ltd and has approached ABG Shipyard Ltd to buy its 53% stake, according to two persons familiar with the matter.
ICICI Venture, which currently manages funds in excess of $2 billion (Rs9,640 crore) and is listed on the over the counter exchange of India (OTCEI), tapped ABG, India’s biggest private shipbuilder, after Larsen and Toubro Ltd showed no interest in the acquisition.
The top management of ABG, accompanied by ICICI Bank officials, visited the facilities of Tebma Shipyards recently, said the two persons, who did not want to be named because the matter is confidential.
ICICI Bank is the lead bank for ABG Shipyard.
Tebma Shipyard specializes in building ships used for supporting offshore oil exploration activities.
A senior ICICI Venture executive said “We do not comment on individual companies.” A spokesperson for ABG declined to comment.
In February 2007, India Advantage Fund–VI (IAF-VI), an ICICI Venture PE fund, acquired a 33% stake in Tebma. Subsequently, IAF-VI acquired 20% more from the public in an open offer in accordance with India’s takeover code.
Under current rules, if a firm acquires more than 15% in a company, it must also make a public offer for an additional 20% in that firm.
IAF-VI invested about Rs100 crore to buy the 53% stake. P.K. Balasubramanian, the original promoter of Tebma, now has a 4.9% stake while the balance 42.1% stake is with the public.
Tebma has also filed a draft letter of offer with the Securities and Exchange Board of India for a rights issue to raise at least Rs77 crore for expansion. Tebma has shipbuilding facilities at Malpe near Mangalore in Karnataka and Chengelpet near Chennai.
It also undertakes sub-contracting work for state-owned Cochin Shipyard Ltd. The Malpe yard can build 10 ships in a year and repair up to four ships at a time.
Tebma currently has an order book of about 23 ships valued at close to Rs1,500 crore.
Analysts say that Tebma could be a strategic fit for ABG, which has an order book of some 100 ships valued at over Rs12,000 crore.
A majority of these orders are for building ships used for supporting offshore oil exploration.
ABG could also utilize Tebma’s facilities to build some of these ships. However, analysts say that a shortage of adequate land could be a roadblock for Tebma’s buyers.
“Currently, Tebma has limited shipbuilding capacity,” said an analyst with a brokerage firm in Mumbai. He did not want to be named because of company policy on speaking to the media. “Capacity expansion is difficult because of land restrictions,” the analyst added.
Given the scattered nature of the firm’s facilities in Mangalore and Chennai, management could also become an issue, said another analyst tracking the sector.
L&T did not show interest in Tebma due to this reason and also because it is building a mega shipyard at Kattupalli in Tamil Nadu, one the persons mentioned earlier said.
In September 2007, ABG agreed to buy India’s largest private sector ship and oil drilling rig-repairer, Western India Shipyard Ltd, from a group of financial institutions led by ICICI Bank.
In the same year, it bought Vipul Shipyard Ltd, which borders its own facilities at the Magdalla port in Surat, Gujarat. ABG also opened a new facility at Dahej in Gujarat last year.
It is also currently locked in a bidding battle with nearest rival Bharati Shipyard Ltd to acquire Great Offshore Ltd, a Mumbai-based offshore oilfield services firm.
Anita Bhoir contributed to this story.