In a rare control-styled transaction by a sovereign wealth fund, Singapore's GIC has struck a deal to acquire a significant minority stake in public listed IT park owner Nirlon Ltd for Rs 660-784 crore ($105-124 million) and has made an open offer to buy more which could cost it as much as an additional Rs 568 crore ($90 million), as per a statement issued late on Tuesday.
GIC affiliate Reco Berry (a part of Recosia Pvt Ltd which is owned by GIC (Realty) Pvt Ltd, which in turn is part of GIC) has signed a deal with promoters of Nirlon to buy bulk of their 12 per cent stake besides holding of two large institutional investors—Geraldton Finance Ltd and Real India Invest Aktiengesellschaft—who together own stake worth just over 29 per cent.
The deal with the promoters is conditional on the acceptance level in the open offer.
GIC arm has made an open offer to buy an additional 28.4 per cent stake from the public. If it is able to garner over 21.7 per cent stake through this route, it would buy only 5 per cent stake from the promoters for Rs 100 crore besides 29 per cent stake from the two institutional investments for Rs 584 crore at Rs 222 a share each.
However, if it is able to get less than 21.79 per cent stake in the open offer it would buy 10 per cent from the promoters for Rs 200 crore and would buy shares from the institutional investors at Rs 175 each shelling out Rs 460 crore for their stake.
It is also in negotiations with certain other shareholders associated with the promoters to buy their 2 per cent stake, which could push its holding further by shelling out an estimated Rs 40 crore more.
Depending on the acceptance level in the open offer and the final agreement to buy this additional 2 per cent, GIC would own anywhere between 39.21 per cent and 64.6 per cent. This may cost it anywhere between Rs 660 crore ($105 million) and Rs 1,292 crore ($204 million), as per VCCircle estimates.
This would make it one among the top five real estate related deals in the country this year.
Nirlon scrip, which has shot up around four times since March this year, closed at Rs 193 a share, down 1.88 per cent in a weak Mumbai market on Tuesday, ahead of the announcement of the transaction.
The deal values Nirlon at Rs 2,000 crore ($316 million). The company had ended the previous year with revenues of Rs 201.5 crore with net profit of Rs 31.6 crore. As of September 30, 2014, it has total assets worth Rs 2,628 crore.
Nirlon Ltd which was originally a nylon textile yarn and conveyor belt maker had turned sick in the 80s and had been moving out of manufacturing business and eventually turned into a real estate owner. Its realty assets were essentially surplus land previously housing its manufacturing units.
Currently it owns Nirlon Knowledge Park (NKP), a professionally planned, large‐scale, information technology office park located in Mumbai. The promoters, Kunal Sagar and Rahul Sagar, were instrumental in its conceptualisation and development.
NKP comprises seven blocks and is spread across a total construction area of 3.3 million square feet. It is located along the Western Express highway in Goregaon and is just 7 km from the airport and 13 km from Bandra Kurla Complex, the emerging Central Business District of Mumbai. Owing to its strategic location, it is substantially let out, with a strong base of international information technology and financial services companies.
Kunal Sagar, executive vice chairman, Nirlon Limited, said “We are delighted to have a global investor with the profile, record and stature of GIC as a long-term partner in Nirlon Limited. It is testimony to our commitment of developing a high quality, ecologically friendly commercial asset of lasting value in Mumbai.”
Kunal Sagar will continue as the executive vice chairman and Rahul Sagar will continue as the executive director of Nirlon Limited.
Loh Wai Keong, managing director & co-head Asia, GIC Real Estate Pte Ltd, said: “Nirlon has created a high quality asset and we are excited about supporting the next phase of growth and asset enhancement to build sustainable value for this development. We look forward to working closely with the Sagars and their management team. This acquisition is consistent with our strategy in India to invest in assets that generate stable income streams over the long term.”
GIC has been one of the most active sovereign funds in India and lately has been particularly aggressive in betting on the real estate sector in the country.
In September it inked a deal with Bangalore-based Brigade Group to jointly invest up to Rs 1,500 crore ($247 million) in residential developments in select cities of South India. The JV aims to acquire land for residential and mixed use developments in cities reporting strong secular demand for high quality residential units.
Early this month GIC inked a joint venture agreement with Gurgaon-based developer Vatika Goup to develop two residential projects in Delhi-NCR.
Besides real estate, GIC has also invested in Flipkart this year.
GIC, like many other peers, has also backed various public listed firms in India but this would be the first instance of a sovereign fund picking a large stake and possibly a controlling equity holding in a listed firm in the country.
Temasek, another state investment firm of Singapore, had reportedly bought a tech park in Bangalore three years ago.
Kotak Mahindra Capital and HSBC Securities are acting as joint managers to the open offer. Amarchand & Mangaldas & Suresh A. Shroff & Co. is the legal adviser to GIC in the transaction.
(Edited by Joby Puthuparampil Johnson)