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Private equity firm Apollo Global Management will invest Rs 2,250 crore in Welspun group companies.
Touted to be its biggest investment in India, funds affiliated with Apollo will invest Rs 1,305 crore in Welspun Corp Ltd, a global pipe manufacturer, of which Rs 788 crore will be invested through preferential allotment of fully/compulsorily convertible debentures (FCD/GCD) and Rs 517 crore through non-voting global depository receipts (GDR).
The FCD/GCD will carry a coupon of five per cent and will be fully convertible, within 18 months, into equity shares at Rs 225 per share, which represents 13.3 per cent of the equity capital of WCL. Further, Apollo will subscribe to the non-voting GDR of Rs 517 crore at the same price of Rs 225 per share.
The deal comes at a time when global private equity funds are taking advantage of the rapid growth in Asia's third largest economy, chasing investment opportunities in subdued stock market conditions.
“This is our largest and the second direct private equity investment so far. India has been high on our priority list and we are looking at opportunities in the country,” Apollo Global Management Managing Director, Mr Mintoo Bhandari, said.
The other firms of the group — Welspun Maxsteel Ltd (WMSL) and Welspun Infratech Ltd (WITL) — will also see capital infusion. WCL and funds affiliated with Apollo will acquire the entire promoter stake in WMSL to expand downstream into the production of high-end steel slabs.
As part of the transaction, WCL would be purchasing 87.5 per cent of the WMSL equity for a total consideration of Rs 805 crore and Apollo the remaining 12.5 per cent for a total consideration of Rs 140 crore. The US firm has also agreed to make an additional Rs 130 crore investment toward capital expenditure in WMSL.
Apollo and its affiliates are in talks with WITL, a subsidiary of WCL, to explore an additional investment of up to Rs 675 crore in WITL in the form of debt, equity or a combination of the two.
Speaking to Business Line , Mr B.K. Goenka, Chairman, Welspun, said the transactions would be completed by August this year and the group intends to use the sale proceeds to scale up business in the infrastructure and energy space. This capital infusion will help WCL become a leading global oil and gas pipe firm, Mr Goenka added.
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