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3i-backed facility management firm BVG switches plan from PE funding to IPO

07 June, 2017

Pune-based facility management firm BVG India Ltd is firming up plans to go public after evaluating private equity funding last year, as it seeks to benefit from stock market buoyancy, a person privy to the development told VCCircle.

The proposed IPO will also open the door for its existing PE investor, the UK’s 3i Group Plc, to exit.

As first reported by VCCircle last December, the company was talking to several bulge-bracket PE firms to provide an exit to 3i.

BVG and 3i had jointly hired Kotak Investment Banking to run the process. It could not be immediately ascertained if Kotak would also manage the proposed public issue.

Email queries to the spokespersons for BVG and Kotak did not immediately elicit a response.

Earlier in the day, Mint reported citing unnamed sources that BVG was looking to float a Rs 1,000-crore IPO to let 3i exit. The newspaper added that the proposed offering was in the early stages of planning and the company was in the process of hiring bankers.

BVG India, a Bharat Vikas Group company, provides facility management services such as mechanised housekeeping, landscaping and gardening, logistics and transportation, and civil and electrical services.

PE firm 3i bought the stake in BVG in 2011 from Kotak Private Equity, which clocked a three-fold return on its investment. Strategic Investments FM (Mauritius) Alpha Ltd and Strategic Investments FM (Mauritius) B Ltd, the affiliates of 3i Group, invested $42.83 million in BVG India for a 26.9% stake on a fully diluted basis.

BVG’s founding Gaikwad family, the controlling shareholders, owns a majority stake in the company. Founder HR Gaikwad owns about 60%, vice chairman and joint managing director Umesh Mane holds about 10%, and angel investors control the remaining.

Bharat Vikas Group also owns other companies such as BVG Clean Technology, BVG Clean Energy, BVG Energy Efficiency, BVG Life Sciences, Livestock and Crop Registry of India, and Satara Mega Food Park.

Among its notable government projects are contracts for the parliament library building in 2002-03, the parliament house in 2003-04, Rashtrapati Bhawan in 2005-06, and for Delhi and Bengaluru metros in 2010-11.

In 2015-16, BVG India reported revenue of Rs 1,500 crore. It recorded earnings before interest, tax, depreciation and amortisation of Rs 300 crore and profit after tax of Rs 130 crore.

Other deals in the sector
The facility management and related segments have seen several deals in the past two years.

In August last year, CX Partners-backed Security and Intelligence Services (India) Ltd, a New Delhi-based security solutions and business support services provider, acquired facility management company Dusters Total Solutions Services Ltd.

In September, SIS filed its draft red herring prospectus with the capital markets regulator Securities and Exchange Board of India for its initial public offering to raise Rs 362.25 crore via a fresh issue of shares besides an offer for sale by CX Partners, promoters and others.

Canada’s Fairfax-controlled Quess Corp had a stellar listing last year after a blockbuster IPO. The firm has been growing through acquisitions, diversifying itself and creating a string of services. It has acquired around a dozen companies since 2010 and plans to buy more in the future.

In other deals, Mumbai-based SILA purchased a 51% stake in Envocare Pest Control; True North and former Godrej Consumer Products Ltd executive Arumugham Mahendran jointly acquired pesticide services company ISS Hicare; ValuePro International Pvt Ltd bought indoor plants firm Gardenia Ornamental.

All these firms are looking to tap into the growth opportunity in the facility management industry, which is projected to grow 23-24% annually over the next three to four years. Quess Corp had said in its IPO documents that the Indian facility management market was estimated to be Rs 6,820 crore in 2014, and had grown at 24% between 2010 and 2014.

According to market research firm F&S Research and Analysis, the industry is projected to grow from Rs 8,415 crore in 2015 to around Rs 20,000 crore by 2019.

Facility management is emerging as a strong business in the commercial services sector, though it is yet to gain significance in the residential segment. It is slowly catching up though, particularly in gated residential communities in cities.

Apart from BVG India, major players in the sector in India include Sodexo India On-site Service Solutions Pvt. Ltd, ISS Integrated Services Pvt. Ltd, Compass Group India Support Services Pvt. Ltd, Avon Facility Management and Updater Services India Ltd.

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3i-backed facility management firm BVG switches plan from PE funding to IPO

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