3i Group to sell 30% stake in BVG India
The deal, expected to be in the $80-100 million range, is part of the group’s plan to cease all India investments
3i Group Plc, a London-headquartered private equity firm, is set to sell its large minority stake in facility management company BVG India Ltd, according to two people familiar with the development.
3i currently holds about 30% in BVG India and the deal size is expected to be in the $80-100 million range, said one of the people. Kotak Mahindra Investment Bank has been hired to run the sale process, both of the people said.
BVG India, the flagship company of Bharat Vikas Group, has a turnover of more than Rs.600 crore. Founded in 1997 as an eight-member cleaning crew, the company has now expanded to more than 55,000 employees and offers facility management services at over 70 locations in India.
BVG provides services and solutions such as mechanized housekeeping, landscaping and gardening, logistics and transportation, and civil and electrical works. Its private sector clients include Tata Motors Ltd, Bajaj Auto Ltd, Mahindra and Mahindra Ltd, Accenture Plc, ITC Ltd and ONGC Ltd.
In 2011, 3i had bought a 27% stake in BVG from existing investor Kotak India Growth Fund I, a fund managed by Kotak Private Equity Group. It also bought additional shares from the promoter family. The total investment was worth Rs.200 crore.
“It is our policy not to comment on rumours regarding our portfolio companies, so we won’t be able to help you on this occasion,” said a 3i spokesperson.
H.R. Gaikwad, chairman and managing director, and Akshay Deodhar, chief financial officer, BVG India, did not respond to emails sent on Tuesday.
3i, which has assets under management worth £13.5 billion (about Rs.89,300 crore) as of 31 March 2015, has investments in Indian firms such as UFO Moviez Pvt. Ltd and Navayuga Engineering Co. Ltd through its private equity arm.
The 3i India Infrastructure Fund, a $1.2 billion fund launched in 2008, has holdings in Adani Power Ltd, GVK Energy Ltd, Ind-Barath Energy (Utkal) Ltd, KMC Constructions Ltd, Soma Enterprise Ltd and Supreme Infrastructure BOT Holdings Pvt. Ltd.
In 2013, 3i Group had announced its plan to cease investments in India, both private equity and infrastructure.
“3i’s positive performance was partially offset by the weaker performance of the India Infrastructure Fund, in which 3i also has a direct interest, which was valued at £54 million at 30 September 2015 (£64 million by 31 March 2015). The valuation of this portfolio remains subject to rupee weakness as well as specific macro-economic issues impacting assets with exposure to the road and power sectors in India,” 3i said in its half-yearly report released in November 2015.
While the infrastructure fund has struggled, the private equity division earned about a 2.8x return from its part exit in UFO Moviez, a digital cinema distribution company. As part of UFO Moviez’s initial public offering, 3i had reduced its stake from 21.5% to 10.3% in 2015.
3i is now trying to push more exits through the plan to sell its shareholding in BVG India.
“Deal activity in the facilities management segment has been somewhat muted over the last year or so as investors grappled with certain regulatory and labour issues and also a slow down in the industrials, real estate, and brick and mortar retail sectors,” said Sanjeev Krishan, partner and leader for private equity and transaction services practice at PwC. He added that a recovery in some of these sectors could drive deal activity.
The market for facility management services in India was estimated at $8.8 billion in 2015 and is expected to grow to $20. 8 billion by 2020, according to the Global Infrastructure Facilities and Project Managers Association (GIFPMA) 2015 report.
“The sector is rapidly increasing driven by expanding office space and opening up of multiple branches leading to increased demand for facility management services. Together with above factors, the escalating consumer awareness regarding the health and safety issues is certain to drive the market in coming years,” the report said.
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