Private equity firm Creador has increased its investment in tile manufacturer Somany Ceramics, buying additional shares from the market besides the fresh capital infusion worth $8 million in the Delhi-based company.
The PE firm bought shares worth $2 million or Rs 12 crore more to take its total exposure to the company to $10 million.
This would be Creador's first bet in the non-financial space as its other deals include Repco Home Finance and Cholamandalam Investment & Finance Company Ltd, the Murugappa Group promoted non-banking finance company.
Under the deal, Latinia Ltd (an affiliate of Creador II LLC) bought 4.34 million shares or 11.19 per cent stake in Somany through a preferential allotment. The shares were subscribed at Rs 115 per unit early this month. The quantum of additional stake purchased from markets could not be determined, but it is estimated to be between two-three per cent, according to VCCircle estimates.
Shares of Somany closed at Rs 137.05 on Wednesday, down 1.79 per cent giving the company a market capitalisation of Rs 531.75 crore.
According to Creador, tile consumption in India is significantly under penetrated. Annual tile consumption per capita is only 0.5 sqm compared with 2.6 sqm for China, 2.8 sqm for Malaysia, 1.4 sqm for Indonesia, 3.8 sqm for Vietnam and 1.9 sqm for Thailand. The Indian tile industry has been growing at 14 per cent over the last four years in volume terms.
Anand Narayan, senior managing director of Creador Advisors India, has joined the board of Somany Ceramics.
Founded by HL Somany in 1969 as Somany Pilkingtons, the firm has plants in Kadi (Gujarat) and Kassar (Haryana). It markets its tiles under brand names like 'Somany', 'Durastone', 'Duragress', 'VC Shield' and 'Somany Express'. The company is also present in the sanitary ware segment through outsourcing from domestic and global markets under the brand 'Acquaware'.
Last year, Somany acquired two Morbi-based companies--Vicon and Amora--for Rs 15 crore to increase production capacity to 41 million sqm per annum from its existing 36.5 million sqm.
For the first nine months of FY14, Somany reported an 18.1 per cent rise in sales to Rs 893.98 crore but profit after tax fell 21 per cent to Rs 16.85 crore compared with the same period in FY13. Somany reported a 27.6 per cent increase in profit after tax (PAT) at Rs 31.59 crore in FY13 with operating income up 20 per cent to Rs 1,050.15 crore.
(Edited by Joby Puthuparampil Johnson)