DS Constructions to raise Rs 900 crore

Delhi-based DS Constructions is close to concluding a funding deal of almost Rs 900 crore via a mix of debt and equity. Part of the loan amount will be convertible into equity at a later date. The money will be used to fund the equity commitments of the company for the various BOT projects. ICICI Securities is the strategic advisor for the deal. Three institutions are in fray for the deal, said sources close to the transaction.

They include a leading Indian bank, a leading European bank and the alternative investment vehicle of a Hong Kong-based hedge fund. At $185 million, this is one of the largest transactions in the private equity space. Of the total amount, the company is picking up $135 million right now and has an option to take up the remainder later. About 25% of the total ($35 million) will be convertible to equity if DS Constructions decides to go for a listing. The company is being tentatively valued at $800-1,000 million, based on revenues and projects at hand.

���Given the company���s high growth trajectory and visibility of future earnings, a mezzanine structure was a better alternative to diluting equity at lower valuations through the private equity route,��� said Ketan Shaah, head (infrastructure), ICICI Securities. DS Constructions is a mid-size construction company ��� it recorded a turnover of Rs 450 crore last year. The company has an order backlog of Rs 4,000 crore, primarily in the road sector. DSC has a 67% stake in a Rs 1,900 crore expressway in Haryana. It is also executing two road projects of total value of Rs 740 crore in Uttar Pradesh.

All these projects have achieved financial closure. In addition to these, the company has also been awarded two hydel projects adding up to 1,260 MW and worth Rs 6,500 crore. However, these haven���t achieved financial closure yet. ���We could consider an IPO in 6-12 months to fund our power projects,��� said Rajinder Singh, chairman (SEZ and power division).

In addition to roads and hydel projects, DS Constructions has also done a railway project on BOT. The company has recently formed a 80-20 joint venture with Munich Airport International to bid for airport modernization projects. A number of large and mid-size infrastructure players tapped the capital markets during 2006. The biggest public issues from the space included GMR Infrastructure, Patel Engineering and Unity Infraprojects.