International Finance Corporation (IFC) is looking to lend around $7 million (Rs 32 crore) to Bain Capital and Citigroup Venture Capital-backed Himadri Chemicals & Industries Ltd, India’s largest producer of coal tar pitch which is utilised in the production of aluminum and graphite. This is a part of the fund-raising process of a larger $150 million investment plan of Himadri.
Besides specialising in high quality coal tar, Himadri also produces carbon black which utilises as feedstock various oils from the coal tar pitch manufacturing process. The company is an existing IFC client and it is investing in several projects with energy-efficient components in the form of fossil fuel abatement, power generation, reduced emission and CO2 credits, among others.
With this deal, IFC’s total committed capital (equity and debt) since January 1, 2011, in Indian firms adds up to $477.5 million, across 17 companies (not counting investments in overseas firms with Indian operations).
Himadri’s proposed project is located in a designated industrial area north of Kolkata.
The Kolkata-based firm is led by D P Choudhary, chairman and founder, besides other members of the Choudhary family. Incorporated in 1987, it is a publicly traded firm on the stock exchanges.
While the promoters hold around 44 per cent stake, Bain Capital owns around 26 per cent while a long-term investor Citigroup Venture Capital owns around 14 per cent stake.
Himadri was Bain Capital’s debut deal early last year, where the private equity firm picked over 15 per cent (the trigger point for a mandatory open offer for listed firms) for Rs 252 crore through a preferential allotment. This was followed up by buying more shares for around Rs 160 crore in the open offer, taking its total commitment to around Rs 412 crore ($92 million).
Incidentally, this one-year-old investment is now marginally underwater with share price hovering around Rs 38, compared to the acquisition cost of Rs 40 per share.
Citigroup Venture Capital had invested Rs 106 crore for a little less than 15 per cent through a mix of equity and warrant issue, with an effective price of Rs 22.9 in late 2006. The warrants were converted into shares as per the deadline in June, 2008. It is sitting on unrealised gains of around 68 per cent.
Soon after raising funds from Bain Capital last year, Himadri had said that it was looking to buy three overseas firms for as much as around $400 million (Rs 1,800 crore). The management said that it had plans to fund the acquisitions, using the borrowed money secured by the assets of the target firms. The expansion has been broken down into two phases, with the first phase ending around late 2011 with investment of $175 million while the second phase will absorb around $225 million.