Arjas Steel Pvt. Ltd, controlled by Asia-focussed private equity firm ADV Partners, has acquired Chandigarh-based Modern Steels Ltd for Rs 86 crore ($11.5 million) in a slump sale deal.
As part of the deal, Arjas Modern Steel Pvt. Ltd, a wholly owned subsidiary of Arjas Steel, will buy the steel, auto components and heat treatment facilities of Modern Steels.
Modern Steels posted revenue of Rs 211.84 crore for the last financial year ended March 2020.
The deal is likely to be closed by March 15, 2021, according to a stock-exchange filing by Modern Steels.
Apart from this acquisition, Arjas is also likely to invest up to Rs 200 crore into Modern Steels, as part of a debottlenecking operation, according to several news reports citing Arjas Steel executives.
Both Arjas Steel and Modern Steels make specialised steels for the auto sector. With the deal, Arjas will ramp up its capacity up to 4.5 lakh tonnes from 3 lakh tonnes at present.
Arjas Steel’s manufacturing facility is based at Tadipatri in Andhra Pradesh’s Anantapur district. The company was acquired by ADV Partners in August 2018 in a $120-million deal from Brazilian conglomerate Gerdau SA. At the time, ADV had said the capacity of the plant would be ramped up from 3 lakh tonnes to 3.5 lakh tonnes.
Gerdau had exited India as part of a move to focus on its Latin American and North American business and move out of non-strategic markets.
According to its website, Arjas Stel counts among its clients almost all leading auto companies based in or operating out of India. These include Maruti Suzuki India Ltd, Mahindra & Mahindra Ltd, Hyundai Motor Co., Hero MotoCorp Ltd, Bosch Ltd, Renault and Ford Motor Co.
Hong Kong-based ADV Partners is a special situation and restructuring investments firm. Apart from Arjas Steel, its India portfolio includes Amber Enterprises India Ltd, Kolkata-based Tarsons Products Pvt. Ltd, infrastructure services provider Feedback Infra Pvt. Ltd and Dr Agarwal's Healthcare Ltd.
ADV Partners was founded in 2013 by Suresh Prabhala, Brad Landes and Jianyi Zhu. It primarily invests in India, Southeast Asia and China. It seeks to make deals between $30 million and $60 million as well as potentially larger transactions as co-investments.
The PE firm has offices in Hong Kong, Singapore, Shanghai and Mumbai. In 2015, it had raised $550 million (Rs 3,575 crore) for its debut fund.