Private equity major Blackstone has invested Rs 300 crore in Gateway Rail Freight Ltd (GRFL), the container train unit of Gateway Distriparks Ltd.
The investment has been made by the PE firm by subscribing to compulsorily convertible preference shares (CCPS), which, on conversion, will entitle Blackstone to acquire 37.27% which can go up to 49.90% dependent on achieving certain EBITDA targets. GRFL has an enterprise valuation of Rs 805 crore after the investment from Blackstone.
The agreement also includes a call option of GDL to acquire the CCPS at the end of 5 years from the date of the investments and a put option of Blackstone to sell the CCPS to GDL at the end of 10 years, the company said in a filing to the stock exchanges.
GRFL claims to be the largest private container train, an ICD operator after deregulation in the sector. It plans to use the funds to deploy new terminals, additional trains and road trailers, expand capacity at existing terminals and strengthen last mile connectivity, said Prem Kishan Gupta, Chairman and MD, GRFL. The company currently operates 17 freight trains and 235 road trailers.
The shares of Gateway Distriparks shot up by more than 5.5% in the morning trade today, reaching Rs 141 before coming down to Rs 136. The deal would be the second investment of the PE firm in the logistics space. It has also invested $75 million in Allcargo Global Logistics Ltd (AGL).
GRFL posted revenues of Rs 182 crore with an EBITDA (Earnings before Interest, Taxes, Depreciation, and Amortization) of Rs 14 crore but reported a loss of Rs 25 crore in FY09. It reported revenues of Rs 51.7 crore and an EBITDA of Rs 2.3 crore in FY08. The company is expecting to break even this year.
GRFL has functional terminals at commercial hubs like Delhi/NCR and Mumbai. The company is also developing terminals at Sahnewal (Ludhiana), Asouti (Faridabad), Chennai, Bhubhneshwar and Chandigarh. It also plans to reach to other cities like Hyderabad, Nagpur, Ahmedabad and Kolkata.
Gateway Distriparks operates container freight stations (CFS) at Jawaharlal Nehru Port Trust, Chennai and Visakhapatnam. Gateway also holds a 50% stake in Snowman Frozen Foods, a logistics company serving the frozen and chilled foods market. Three Japanese firms also hold a stake in Snowman, which is raising $5 million in PE.
Akhil Gupta, chairman & MD of Blackstone India, said that rising imports/exports and increasing trade-to-gross domestic product (GDP) ratios are some of the factors that make the logistics sector attractive. He also said that container trains are an attractive bet as rail is more economical to road and India is also behind the world in "containerisation".
Container freight services is an area that is increasingly catching the interest of private equity players. Earlier this year India Value Fund picked up a majority stake in container trains operator Innovative B2B Logistic Solutions (Inlogistics). Continental Warehousing Nhava Sheva Ltd, which mainly operates CFS at the Mumbai port, raised $16 million from Aureos India Fund and ePlanet Ventures recently.