Infrastructure finance firm Srei Infrastructure Finance Ltd is merging privately held Quippo- a infrastructure rental service provider which counts amongst its minority investors names such as IDFC Private Equity and GIC among others - with itself. The merged entity will bring all infrastructure assets of the group under Srei-Quippo in which the promoters' holding will go up to 46% as against 30% in Srei Infrastructure Finance Ltd.
According to the merger plan, Quippo shareholders will get three shares of public listed Srei for every two shares owned in Quippo. As of now Srei owns 16.8% of Quippo while the Kanorias(promoters of Srei) own 57%. The remaining is held by outside investors including the PE firms. Early investors in Quippo—IFC and FMO who owned as much as 40% in the firm, exited by selling to the local promoters in 2006. In March 2007, Quippo had raised Rs 150 crore by selling stake to IDFC PE and GIC.
Srei expects to complete the entire integration process by the second quarter of 2010-11 (-July-September). The appointed date of merger is April 1, 2010.
Quippo operates through five companies - Quippo Construction, Quippo Telecom, Quippo Oil & Gas, Quippo Energy and Asset Valuation & Disposal company. Quippo Telecom Infrastructure Ltd (QTIL), which had picked up 49% in Wireless Tata Telecom Infrastructure (WTTL), Tata Teleservices’ tower arm is also part of Quippo. Srei Infrastructure, in contrast, is engaged in equipment and project financing besides project advisory. The merged entity would continue to function under the name Srei Infrastructure.
The net worth of the integrated company would go up to around Rs 2,000 crore from Rs 750 crore of Srei, whereas the total revenue would touch Rs 2,500 crore. The merger would also create a treasury stock of 9.5% of the company which will be held by a trust.
Quippo Telecom, a JV between Quippo and Tata Teleservices, Kanoria said, would continue to exist and would become a subsidiary of Srei after the merger.
The share swap ratio was decided based on valuation reports prepared by consulting firms BDO Haribhakti Consulting Pvt. Ltd and KPMG India Pvt. Ltd, and its fairness confirmed by ICICI Securities.
One of the reasons for the merger is to expand Srei’s capital base so it can borrow more. As of December 31, Srei had total debt of around Rs 3,000 crore almost four times its net worth. Srei scrip crashed 11.8% to Rs 68.8, on Friday. Srei also announced that after the merger it would allot four bonus shares for every five held.
Meanwhile, Srei also disclosed that a consortium led by it has emerged as the highest bidder to acquire 57.17% stake in DPSC in an all-cash deal. Meanwhile, Srei also disclosed that a consortium led by it has emerged as the highest bidder to acquire 57.17% stake in DPSC in an all-cash deal. DPSC is a power distribution company in the Asansol-Durgapur region and also has two power generating stations — Chinakuri (30 mw) and Dishergarh (15 mw).
Andrew Yule and its subsidiaries own 15.20% in DPSC, while LIC and United India Insurance Company Ltd own 30.61% and 11.36%, respectively.