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Alok Industries in talks with PE firms to raise Rs300 crore

Alok Industries in talks with PE firms to raise Rs300 crore

Mumbai: Mumbai-based textiles company Alok Industries Ltd that has business interests in real estate and retail, is in talks with a few private equity (PE) firms, including Delhi-based Red Fort Capital Advisors Pvt. Ltd, to raise upwards of Rs300 crore for a 20-25% stake in its real estate development project in Peninsula in mid-town Mumbai.

A senior executive of the company confirmed this, but requested anonymity, as the deal is yet to be concluded. The real estate project is owned by a 100% subsidiary of Alok Industries.

Axis Bank Ltd’s investment banking team is adviser to Alok Industries for this PE deal.

The price as well as the quantum of stake to be sold is still under negotiation.

Red Fort Capital, a realty-focused PE firm, could not be immediately reached for comment.

Alok Industries was earlier in talks with another set of PE firms, including an arm of financial services conglomerate JPMorgan Chase and Co., to fund its real estate development project in Nahur, a north-eastern suburb of Mumbai.

This deal, too, is yet on paper. Alok Industries, however, has reached an informal agreement with the JPMorgan arm for about Rs130 crore against some 30% stake in this project, said the executive.

Mint could not independently verify this claim with JP Morgan executives.

Alok Industries’ stock, traded on Bombay Stock Exchange, closed at Rs40.90 on Friday. At this price, the company is capitalized at Rs805.61 crore on the bourse.

The stock’s valuation dropped more than 60% this year so far even as the Sensex, the benchmark index of the exchange, has lost some 27%. Many medium and small companies have slumped more than the Sensex, as in Alok Industries’ case.

In the beginning of this year, Alok Industries’ stock price was above Rs100. The company’s market capitalization at that point was more than Rs1,800 crore.

The two development projects mark the textile group’s entry into the commercial real estate business.

Alok Industries, however, will remain selective in projects, according to the executive. “We are planning to do only good projects."

The project cost for the Peninsula commercial real estate, including interest costs, is more than Rs1,200 crore, the executive said.

Dilip Jiwrajka, managing director of Alok Industries, in a press statement after announcing its results for fiscal year 2008, said the company will consolidate its operations this year.

“In the course of last year, we also foot printed the real estate sector and expect to generate reasonable returns from this sector in the current fiscal," he had said.

For the year that ended on 31 March, Alok Industries’ net sales grew by 18.34% to Rs2,159.25 crore compared with Rs1,824.68 crore in the previous financial year, while operating net profit for the same period went up 23.79% to Rs167.34 crore.

The firm’s earnings per share (EPS) for the fiscal year to March was Rs11.51 compared with Rs9.70 during the previous financial year.

Alok Industries, established in 1986, has since expanded into weaving, knitting, processing, home textiles and readymade garments and now has capacities of 82.50 million metres of sheeting fabric and 6,700 tonnes of terry towels for its home textiles business, 105 million metres of apparel-width woven fabrics, 67,200 tonnes a year of knitted fabrics and 22 million pieces a year of garments. It also has a presence in polyesters.

The promoter’s holding in Alok Industries currently stands a tad above 35%.

Caledonia Investment Plc., a UK-based investment trust company listed on the London Stock Exchange, holds a 15% stake in Alok Industries. The foreign institutional investor fund has been steadily increasing its stake in the firm.

A Reuters report in mid-2007 had said Caledonia had £71.8 million (Rs575 crore), or 5.4 % of its total assets, in India.

The report quoted Tim Ingram, its chief executive, saying that the fund is set to increase investments in India. Ingram is also a director at Alok Industries’ executive board.

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