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Oman India Joint Investment Fund to invest $13M in Solar Industries

BY  TEAM VCC
This is the second deal this month for the investment firm with a corpus of $100m, but which has been lying low after its launch two years ago.
Solar Industries India Ltd (SIIL)

Industrial explosives maker Solar Industries India Ltd (SIIL) has struck a deal to raise Rs 72 crore ($13 million) from Oman India Joint Investment Fund through a preferential allotment. Oman India Joint Investment Fund, a private equity fund sponsored by Oman’s sovereign wealth fund and India’s largest lender State Bank of India, will pick up 4.28 per cent of the expanded capital of the public-listed Solar Industries.

The investment firm will subscribe to 7,74,195 equity shares of Solar Industries at Rs 930 a unit, marginally higher than the closing price of Rs 927.65 a share on Monday. Solar Industries scrip has risen 40 per cent over the past seven months and hit a new high of Rs 955 a share on Tuesday before paring some of the gains. Currently, the firm is valued at Rs 1,614 crore.

The company’s board cleared the proposed fundraising on Monday. SIIL had earlier said that it was looking to raise funds from private equity firms.

Founded in 1995, Nagpur-based Solar Industries (formerly Solar Explosives Ltd) has a capacity of over 2.8 lakh MT of explosives (with over 2.1 lakh MT of bulk explosives and the rest being cartridge explosives), 190 million detonators and 75 million metres of detonating fuse. For the year ended March 31, 2012, the company had net sales of Rs 967.5 crore with net profit of Rs 101.2 crore.

The promoters (the Nuwal family) held 74.9 per cent stake in the public-listed company as of June 30 and with the fresh issue, their holding will come down to a little less than 72 per cent. The company, which has 17 manufacturing facilities in India besides a unit each in Zambia and Nigeria, is currently building a new plant in Turkey. It claims to have increased market share in India from 24 per cent to 27 per cent in FY12.

The explosives industry is highly regulated due to high safety and security concerns. The products are essentially used in the mining sector and the global demand is driven by economic development, energy and base mineral demand.

The Indian explosives market is driven by increased spending and activity in the Indian infrastructure segment. The Indian market of civil explosives is pegged at around 0.7 million tonnes worth Rs 2,750 crore, annually. This accounts for around 5 per cent of the global civil explosive consumption and the local market is growing at around 6-7 per cent annually. India is the world’s eighth-largest explosive manufacturer and has over two dozen players in the business.

In India, the mining sector accounts for 80 per cent of the demand for explosives, which in turn, is dominated by coal mining (with Coal India being a big customer); around 20 per cent of the demand for explosives in India is catalysed by the infrastructure sector.

This would be first PE funding for the company, which went public over six years ago. Five years ago, it acquired Navbharat Coalfields Ltd, a privately held firm engaged in coal mining and washery projects.

For Oman India Joint Investment Fund, this comes as a back-to-back transaction after it had arguably made a debut deal by picking up nearly 20 per cent stake for $9.8 million (approx. Rs 55 crore) in Chennai-based Indus Teqsite Pvt Ltd.

Oman India Joint Investment Fund, formed by the State General Reserve Fund (SGRF) of Oman and SBI, currently has a $100 million corpus, equally contributed by the two parties. Its management company is owned 50:50 by SBI and SGRF and it has a sector-agnostic investment mandate. At the time of its launch, it was said that the corpus of the fund could be increased up to $1.5 billion through future schemes.

(Edited by Sanghamitra Mandal)

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