Private equity firm India Equity Partners (IEP) is leading a Rs 150-crore ($32.5 million) investment into A2Z Maintainance and Engineering Services Pvt Ltd, a Gurgaon-based provider of engineering, procurement and construction (EPC) services to the power transmission and distribution sector. A2Z is also present in waste management, an activity which it will now look to scale up following the fund raising.
Of the Rs 150 crore raised, two-thirds have been invested into the company while the rest was used to buy out the stake of early investors in the firm. Beacon India Private Equity Fund, which invested Rs 75 crore in A2Z in 2007, has also participated in this round. The company also received an investment from leading stock market investor Rakesh Jhunjhunwala.
A2Z started out as a facility management services firm in 2002 and later forayed into power. According to its website, the company posted revenue of Rs 740 crore in FY09 against Rs 464 crore in FY08. The firm is expecting revenues of Rs 1,225 crore this year. With new funding, the firm also plans to foray into renewable energy.
“With this investment, we are well-positioned to continue our rapid growth of the past few years and cement our leadership position in each of our business,” said Amit Mittal, chairman and MD of A2Z, in a release.
In power, A2Z has projects across the country with clients like NHPC, NTPC, BHEL and various state electricity boards.
"The potential of waste management business, a sector we have been looking at for a while, was a big attraction for us,” said Gaurav Mathur, MD at IEP, who will also be joining the board of A2Z. This will be the first private equity deal by IEP in over 18 months. The firm has a $350-million fund and has invested in Bharti Infratel and Manappuram General Finance & Leasing.
A2Z’s foray into waste management comes at a time when the country is witnessing rapid urbanisation. The waste management business will operate through wholly -owned subsidiary A2Z Infrastructure Services Pvt Ltd and will focus mainly on municipal solid waste management. The company is also setting up an integrated waste management plant in Kanpur which will add around Rs 75 crore to its turnover annually on a conservative basis, said group CFO Rakesh Gupta. This plant is expected to be operational by December this year.
“The sector has a lot of potential as only 5-6% of the total municipal solid waste is scientifically processed,” adds Mathur. Also, long-term contracts and its non-cyclical nature make it a stable business.
Waste management—including municipal, electronic, biomedical and industrial wastes--is a Rs 1,000-crore market expected to reach up to Rs 2,700 crore by 2013, says a report by companiesandmarkets.com.
The sector has attracted private equity attention in the recent past also. In June, Standard Chartered IL&FS Asia Infrastructure Growth Fund bought a stake in Hyderabad-based waste management company Ramky Enviro Engineers Ltd (REEL) for Rs 200 crore. Reverse logistics player RT Outsourcing, which is planning a foray into e-waste management, also got Rs 75 crore from NEA last month.