Mumbai: Asia-focused special situations investment firm SSG Capital Management Ltd is interested in acquiring a stake in transformer maker Emco Ltd, said two people aware of the development. Emco is engaged in manufacturing power equipments and is the third largest manufacturer of transformers in India.
Emco has debt worth Rs1,700 crore.
“Emco promoters are in discussions to bring in an investor who can acquire some part of equity capital as well as debt from its lenders. SSG is one of the financial investors that has shown an interest in the asset and has been in talks with the promoters," said one of the two people cited above, requesting anonymity. As part of a restructuring plan, the board has approved raising up to Rs600 crore from various avenues. Emco is restructuring its debt through the so-called Scheme for Sustainable Structuring of Stressed Assets (S4A). Under the S4A scheme, debt is split into sustainable debt—which cannot be less than 50% of existing debt and will have to be serviced on the same terms as those of existing facilities—and unsustainable debt, which can be converted into equity or redeemable optionally convertible preference shares/optionally convertible debentures (OCDs).
In June, the board of Emco approved raising not more than Rs225 crore by way of a rights issue/qualified institutional placement and/or a preferential allotment. Besides, it also approved the issue of equity shares up to Rs75 crore to lenders pursuant to conversion of existing loans and issue of OCDs or any other securities up to Rs300 crore to lenders pursuant to conversion of existing loans. Mails sent to Emco Ltd and SSG Capital did not elicit any responses.
Established in 1964, Emco counts power utilities, steel mills, cement plants, petrochemical complexes, fertilizer plants and independent power plants among its customers.
In 2009, Emco Ltd sold its subsidiary Emco Energy Ltd to GMR Energy Ltd (GEL).
As of June, Emco promoters including Rajesh Jain and his family held a 45.33% stake while institutions and non-institutions held 2.2% and 52.4%, respectively.
“SSG Capital is likely to invest Rs150-200 crore in Emco," said the second person cited above, also on condition of anonymity. SSG Capital Management, an active investor in the Indian distressed assets space, is planning an investment vehicle in India to buy distressed assets in the country, Mint reported on 2 August.
Founded in 2009 by former Lehman Brothers Holdings Inc. executives Edwin Wong, Andreas Vourloumis and Shyam Maheshwari, SSG Capital Management is focussed on China, India and South-East Asia.
On 24 July, Mint reported that SSG Capital was raising close to $2 billion across two Asia-focused new funds.
SSG’s investments in India include Asset Care and Reconstruction Enterprise Ltd (ACRE) and Amtek Auto Ltd debentures which it bought from JPMorgan Asset Management. It has also invested in real estate.
Many Indian companies are seeking to restructure their debt with creditors. In June, lenders of infrastructure firm Hindustan Construction Co. Ltd (HCC) agreed to recast standalone debt of Rs4,900 crore in one of the first S4A approvals after the Reserve Bank of India (RBI) tweaked the scheme in November.