Private equity giant Blackstone Group is close to picking up 15-16 per cent stake in a secondary transaction in International Tractors Ltd, a major manufacturer of small-to-medium-sized tractors, under the Sonalika brand. According to sources close to the deal, Blackstone is looking to pick up the stake for around Rs 600 crore, which will value the firm at nearly Rs 4,000 crore.
The transaction has entered its last stages of documentation, with the term sheet already signed and the due diligence complete, added sources.
The deal is expected to be an entirely secondary share purchase, with the PE firm buying the stake of existing investors and also buying some stake from the promoters. It is learnt that Blackstone is buying the shares held by the private equity arm of JM Financial.
When contacted by VCCircle, a Blackstone spokesperson declined to comment.
International Tractors' spokesperson could not be reached for a comment till the time of posting this article.
In the past, International Tractors has raised private equity funding from JM Financial, Citi Venture Capital International and UK’s 3i Group Plc. Also, Japan’s second largest tractor maker Yanmar, with whom International Tractors has a technical collaboration, holds 10 per cent-12 per cent stake in the firm.
Delhi-headquartered International Tractors also has a manufacturing facility in Hoshiarpur, Punjab. It is a part of the Sonalika Group, which is owned by the Mittal family and has more than 25 years of experience in manufacturing tractors, farm machines & automobiles. The group’s tractors are also exported to global locations like Nepal, Bangladesh, Africa and South America.
According to a credit rating report, International Tractors reported an operating income growth of 29 per cent to Rs 1484.1 crore, with profit after tax of Rs 185.7 crore in FY10. It reported a net profit of Rs 191.2 crore and a turnover of Rs 1,444.6 crore for the first nine months of FY11.
Other companies of the $600 million Sonalika Group include International Cars & Motors Ltd (which makes the multi-utility vehicle Rhino), farm equipment maker Sonalika Agro and International Autotrac Finance (an NBFC serving rural and semi-urban consumers).
Blackstone has earlier made foray into India’s agriculture sector by investing $54 million in Hyderabad-based Nuziveedu Seeds Ltd, which is the country’s largest hybrid cotton seed company.
Food & agriculture accounts for nearly one-fifth of India’s GDP and over 50 per cent of its workforce, with the growth potential of the industry pegged at $280 billion in the coming years. With the demand for food products ever increasing and the rising inflationary pressure, investors’ interest in the sector has also increased. During the past three years, there have been more than 60 private equity deals in this space, valued at over $650 million.
One of the most notable private equity investments in the tractor space took place when PE major Actis picked up majority stake during the privatisation of Punjab Tractors, along with Dabur’s Burman family. Punjab Tractors was later acquired by Mahindra & Mahindra.