Blackstone strikes again; gets big-ticket in India

HYDERABAD: US-based private equity fund Blackstone Group has invested $150 million to pick up a 12.5% stake in Hyderabad-based Nagarjuna Construction Company (NCC), the third-largest construction company in India. The investment has been routed through its Mauritius subsidiaries.

Like many other big private equity players, the Blackstone Group is bullish on infrastructure investments in India. The $150 million (Rs 600 crore) investment is the largest and the first of its kind that the company has made in the infrastructure segment. The big-ticket investment comes days after the private equity giant picked up a 50.1% stake in apparel major Gokaldas Exports at a price of Rs 482.5 crore.

The Blackstone Group may also be open to hiking its stake in NCC further, though these are early days yet. Infrastructure spends in India are projected to top $470 billion during the Eleventh Plan against an earlier estimate of $320 billion. Private equity players like the Blackstone Group are eyeing a slice of the pie.

In fact, the Blackstone Group, along with IDFC and Citi Bank, is also raising another multi-billion dollar fund for infrastructure investments in India, said Akhil Gupta, chairman and managing director of Blackstone Advisors India.

NCC will also raise money through a fresh issue of shares and convertible warrants. The warrants will be redeemable after 18 months as per Sebi guidelines. Blackstone will have representation on the company’s board. Kotak Investment Banking and SSKI acted as the investment banking advisors to NCC and Blackstone, respectively, in the transaction.
“With its global reach, Blackstone brings immense value to the company.

This investment will not only allow us to make additional investments in public-private infrastructure projects, but will also expand our capital base, enabling us to bid for larger projects going forward and strengthening our strategic positioning in the market,” said A Ranga Raju, managing director of NCC.

Founded in 1978 by AVS Raju and currently led by his son A Ranga Raju, NCC is into construction services and, through its subsidiaries, owns several infrastructure assets on a build, operate and transfer (BOT) basis.

It is listed on the BSE and the NSE. Mr Gupta of Blackstone Advisors India said the company believes that planned infrastructure expenditure, economic growth, and urbanisation will drive long-term growth in India’s construction sector. “We look forward to supporting the continued growth of the company (NCC) as it delivers on its long-term growth plan,” he said.

To start with, NCC is planning to use the money to fund its BOT projects, including the Machilipatnam port in Andhra Pradesh, a 100 MW power project in Himachal Pradesh and a 280 MW project in Sikkim. Blackstone funds will invest equity capital in NCC in two tranches.

The Blackstone Group is a leading global alternative asset manager and provider of financial advisory services. Its alternative asset management businesses include the management of corporate private equity funds, real estate opportunity funds, funds of hedge funds, mezzanine funds, senior debt funds, proprietary hedge funds and closed-end mutual funds.

The group also provides various financial advisory services, including mergers and acquisitions advisory, restructuring and reorganisation advisory and fund placement service.