Engineering procurement and construction firm Punj Lloyd is selling 19.43% in Pipavav Shipyard to its partner SKIL Infrastructure for Rs 656.4 crore (~$145 million) to raise cash by selling assets.
Notably, Punj Lloyd’s shares in Pipavav Shipyard has a lock-in for three years as the company just went public. But since it is selling before the lock-in period is over, SKIL will have to make an open offer to other minority shareholders for a further 20% stake that could possibly take SKIL’s holding around 60%.
The share sale will help Punj Lloyd partly stem its financial position. The company has been beset with delays in projects, debt burden and problems in its UK subsidiary. Although Punj Lloyd has recovered after clocking new loss on a consolidated basis in 2008-09, profits this year is expected to be lower than 2007-08 when it was over Rs 350 crore.
Promoted by SKIL Infrastructure Ltd and Punj Lloyd Ltd, Pipavav had a large group of institutional investors before it got listed including some PE firms. Other investors in Pipavav include Blackstone (portfolio investment arm), Merrill Lynch, Galleon, New York Life, Trinity, The India Fund among others.
Early this year, 2i Capital sold a quarter of its 6% stake in Pipavav Shipyard in the open market pocketing Rs 55 crore (at Rs 55/share). The cost of acquisition in its three year old investment was Rs 25/share for 2i Capital. 2i Capital had invested a total of Rs 100 crore in two tranches through convertible bonds in September’06 (Rs 84 crore) and February’07 (Rs 16 crore).