Mumbai: Infrastructure firm Hindustan Construction Co. Ltd (HCC) on Monday said it would buy a controlling stake in Swiss developer Karl Steiner AG and enter the growing business of building offices.

HCC will buy 66% of Karl Steiner by issuing new shares worth 35 million Swiss francs (around Rs150 crore). It will buy the remaining 34% in 2014 from Peter Steiner, Karl Steiner’s sole owner, Ajit Gulab-chand, HCC’s chairman and managing director, told reporters.

“We do not expect to take over any liabilities from the company at this stage," Gulab-chand said. “At the same time, about 700 million Swiss francs worth of topline (revenue) from the company will get transferred to us."

The deal is subject to regulatory approvals in Switzerland and India.

Gaining expertise: HCC chairman and managing director Ajit Gulabchand says the firm will acquire the remaining 34% in 2014. Abhijit Bhatlekar/Mint

“This acquisition will give us the necessary pre-qualification for such (commercial) buildings in India which, as we all know, is a growing market," Gulabchand said.

The commercial buildings market is growing at 40% and operating margins are between 3.5% and 5%, according to Arjun Dhawan, president, HCC Infrastructure Ltd, a wholly owned subsidiary of HCC. The firm estimates the market in India is worth between Rs65,000 crore and Rs75,000 crore.

HCC has an order book of Rs19,000 crore, debt of Rs2,500 crore and Rs150 crore in cash. It might have to take on debt to fund the deal, said Praveen Sood, group chief financial officer, HCC.

That is of some concern to sector analysts, who cautioned against the already high debt in the firm, even as they cheered the deal valuations.

“The debt-to-equity (ratio) of the company is high at 1.4 and we expect the company to need another Rs600 crore for their existing road projects and also this acquisition," said Abhinav Bhandari, an analyst at Elara Securities (India) Pvt. Ltd. “The company will need to borrow at least Rs400 crore, accounting for an estimated Rs125 crore profit we expect for next year."

The HCC scrip fell 2% to close at Rs139.95 on the Bombay Stock Exchange, on a day the bourse’s benchmark Sensex index was flat at 17,164.99 points.

Another analyst at a private brokerage, who declined to be named, said the acquisition will give the company a foothold in the lucrative commercial realty market, but cautioned that it would have to fight for market share with established firms such as Larsen and Toubro Ltd and Nagarjuna Construction Co. Ltd.