In one of its largest private equity investments till date, Baring Private Equity Partners India today announced an investment of $90 million in Cethar Vessels Limited, the second largest manufacturer of boilers for power plants, for a minority stake. VCCircle was the first to report that Baring Private Equity Partners is investing close to a $100 million in the boiler manufacturer. Siguler Guff Advisors, an investor or limited partner in Baring, has also co-invested in the deal, according to information with VCCircle.
The monies raised will be used for setting up facilities to manufacture steam turbine and generator, acquiring land for developing power plants and enhancing the manufacturing capabilities for super critical boilers. IDFC Capital were advisers to this PE transaction.
The company is currently executing power plants of unit sizes up to 350 MW and is in the process of getting orders for super critical boilers in the capacity range of 660 to 800 MW.
Baring India, which has a total of $1 billion under management, raised its fund III of $550 million in 2008. The fund recently invested Rs 157 crore along with Matrix Partners in Kerala-based NBFC Muthoot Finance Ltd, while Cethar will be its biggest transaction yet.
Trichy headquartered Cethar Vessels was founded in 1981 by a first generation entrepreneur and current chairman, K.Subburaj, a mechanical engineering graduate from Thiagaraja College of Engineering, Madurai. It claims to be the second largest boiler manufacturer, next to the public sector major Bharat Heavy Electricals Ltd, which commands about two-third market share. Cethar achieved a sales turnover of Rs.1,405 crore in 2007-2008, according to its website.
BHEL had revenues of Rs 33,572 crore in 2009-10 with net profits of Rs 4,310 crore. The other large companies in this peer group are Siemens (2009-10 sales: Rs 9,400 crore), Crompton Greaves (Rs 5,284 crore) and ABB (Rs 6,291 crore), all of which are listed.
Cethar, which has been in the boilers business for quarter of a century, also recently got into the manufacture of supercritical boilers. It secured the ‘supercritical technology’ (boilers that operate at higher temperatures and pressures and are hence more efficient) from Siemens via the former’s long-time technology partner, US-based Riley Power.
There have been a few private equity deals in this space. In 2009, Motilal Oswal Private Equity Advisors Pvt Ltd (Motilal PE) invested Rs 40 crore in Power Mech Projects Ltd for an undisclosed stake. The company is engaged in erection, testing and commissioning of boilers, turbines and generators for thermal and gas-based power plants besides overhauling and maintaining them.