How was Blackstone’s part-exit from construction firm NCC

Private equity giant Blackstone has started liquidating another of its loss-making investments in an Indian listed company. The PE firm has sold around a third of its stake in construction firm NCC Ltd (formerly Nagarjuna Construction Company Ltd), taking a small haircut in the process, information pieced together through stock exchange filings show.

The firm has sold 18 million shares, bulk of it in the past few weeks as it looks to wrap up some of its investments that turned bad in the country.

Blackstone, which had originally invested in the firm in 2007, had sold some shares last year and then resumed stake sale with a large chunk sold since mid-July.

It is estimated to have pocketed around Rs 145-150 crore through the part-exit taking a haircut of around 5-10% on its investment, not counting dividend earnings, as per VCCircle estimates. Its loss in dollar terms is higher as the greenback has appreciated 67% against the Indian currency, since Blackstone invested in NCC.

But, one person privy to the transaction said, Blackstone also invested more in the firm through the PN route via third party entities, when the share price was much lower and has made a modest profit in the part-exit. This could not be independently verified.

Blackstone and NCC declined to comment on the development.

Blackstone had originally invested in the Hyderabad-based firm nine years ago, at the peak market valuations. It had initially invested Rs 409 crore to pick around 10% stake in NCC and had also got the right to subscribe to equity convertible warrants.

However, the PE firm eventually did not convert the warrants into shares within the stipulated time, blaming it on pending approval for the deal from FIPB, the nodal government body clearing foreign investments in the country.

It had originally picked shares at Rs 202.5 each. The PE firm also bought additional shares in early 2011 and then participated in the rights issue of NCC in late 2014. It had brought in around Rs 100 crore more into the firm, it is learnt.

In the rights issue, it got fresh shares at just Rs 20 each which significantly brought down its average cost of ownership, even though its investment remained underwater.

Blackstone’s remaining investment in NCC is currently worth Rs 328 crore.

NCC shares last traded at Rs 83.95 each, down 2.21% on BSE in a weak Mumbai market on Thursday.

For Blackstone, this marks another loss-making liquidity activity from its private investment in public enterprise or PIPE deal in India.

Last month, it sold another large chunk of shares in garment exporter Gokaldas Exports Ltd. In June, Blackstone had sold just under 10% stake. Blackstone had previously part exited from Gokaldas Exports two years ago. It had initially sold 5.6% stake out of its 68.2% holding in June 2014 and later that year, it sold another 4.5% stake.

Blackstone had invested in Gokaldas around the same time it bet on NCC, in 2007, just months before the stock market tanked.

For Blackstone that struck a bulge bracket deal early this year with an agreement to acquire up to 60.48% of Bangalore-headquartered IT services firm Mphasis Ltd from Hewlett Packard Enterprise for Rs 5,466 crore, NCC marks the second exit activity from any Indian firm in 2016.

Last year, it sold its majority stake in CMS to Baring Private Equity Asia. Last year, it also part exited in the IPO of flavours and fragrance maker SH Kelkar & Co Pvt Ltd. Early last year, it had also sold stake in auto parts firm Agile Electric. All these were profitable exits for the PE firm.

While Blackstone had made some good investments in the private space, it had bet on some public-listed firms such as Gokaldas Exports at the wrong time when stock market valuations were peaking out in India.


NCC, once a hot company in the infrastructure construction sector, had suffered from the slowdown in the economy. The firm had previously also attracted ChrysCap and Beacon India Private Equity as investors. ChrysCap exited the firm last year.

While the firm has grown its revenues three-fold since Blackstone invested, its earnings remain low. The firm ended FY2015-16 with revenues of Rs 9,583 crore with net profit of Rs 110.5 crore against turnover of Rs 3,635 crore with net profit of Rs 167.5 crore for the year ended 31 March 2008.

The construction firm has been selling assets to cut debt.

In January this year, NCC sold its 51% stake in Western UP Tollway Ltd, which operates a highway project in Uttar Pradesh, to private equity firm I Squared Capital. The deal also involved Gayatri Projects Ltd and its subsidiary Gayatri Infra Ventures Ltd selling their stake to I Squared. The enterprise value of the deal was Rs 575 crore (about $85 million).

A month later, NCC sold its 38% stake in Bangalore Elevated Tollway Ltd to IDFC Alternatives.

In April, NCC signed a pact to sell some additional stake in Sembcorp Gayatri Power Ltd (SGPL) to Singapore's Sembcorp Utilities Pte Ltd for Rs 301.26 crore (about $45.4 million) in the second tranche of a transaction agreed the previous month.

NCC will receive a net amount of Rs 77.04 crore after adjusting a "mobilisation advance" received from SGPL for executing the project, it had said.

In March, the Indian infrastructure firm had said it agreed to sell a stake in SGPL to Sembcorp Utilities for Rs 352 crore ($52 million).

This article has been updated to incorporate some additional information.

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