US-based private equity firm TA Associates, which has backed companies such as Idea Cellular Ltd, Micromax Informatics Ltd and Dr LalPath Labs Pvt Ltd, has struck its fourth deal in India. The firm is investing around $40 million for an undisclosed stake in privately-owned Tega Industries, a maker of consumables for the mining industry.
This is the first time Kolkata-based Tega is bringing in an outside institutional investor into the company. Although the private equity firm refused to reveal the stake bought, an Economic Times report suggested that the deal is for around 15 per cent equity which values the company at around Rs 1,200 crore ($270 million).
The money will be used for expanding existing operations and inorganic growth. This is an interestingly diversified deal for TA Associates, which is not too active in backing purely industrial firms. Its website features portfolio companies mostly under categories like services, technology and consumer-related segments.
“Tega is our first investment in the industrial space in India. It is a high value addition business and has strong characteristics of the types of businesses TA likes to back. We have partnered with the company to support them in the next wave of growth,” Naveen Wadehra, director and country head, TA Associates India, told VCCircle.
After investing over $100 million in 2006 in a pre-IPO deal in Idea Cellular, the firm had been relatively silent for three years. After the three year hiatus, the firm wrote its first big check in 2009, when it backed with a $45 million check in Indian cellular phone maker Micromax. Last year, the PE firm also bought a stake in the diagnostics chain Dr Lal PathLabs in a secondary deal from Sequoia Capital.
Founded in 1976, Tega offers a range of products and services used in mining, mineral processing, screening, grinding and material handling. Tega’s primary offering is customised wear-resistant mill liners, used for grinding and sizing of mineral ores. Tega has manufacturing facilities in India, South Africa and Chile, with sales and support offices in 14 countries and customers across 62 countries.
The overall mill liner industry is estimated at more than $1 billion and has historically been dominated by steel liners.
Led by technocrat Madan Mohanka, Tega had been on an acquisition drive and had snapped up two firms in Australia and Chile in quick succession early this year. And the takeovers have boosted its global market share in the niche industry. Although it is far behind the market leader, Finland’s Metso, Tega has been eyeing other deals to expand its operations further.
Tega is believed to be an under-leveraged firm that has allowed to bankroll its recent acquisitions through debt. It will now use some portion of monies raised from TA Associates to part-finance future deals. Tega is planning more acquisitions in near future and is suitably positioned for building a strong global franchise, Wadehra added.
Khaitan & Co and Goodwin Procter were the legal advisors to TA Associates while Argus Partners served as legal counsel to Tega. Avendus Capital provided financial advisory services to Tega.
Writing Large Checks
TA Associates has invested under $400 million in India till now. Its average ticket size of investments in India has been between $45 million and $125 million. The Boston-headquartered private equity firm, which manages more than $16 billion in capital globally, has been operating in a mid-market deal-making space as majority of the private equity firms here.
It is now looking to increase its ticket size of investments here and, in fact, even looking to match the average global check size, according to Wadehra. In April this year, TA Associates, along with private equity group Summit Partners, took majority control of Bigpoint, pumping in $350 million for a 67 per cent stake in the German casual gaming group.
The Indian deal-making environment is expanding and there are enough opportunities to be seen for large deals, Wadehra adds. Business services, financial services and consumer will be the key focus area for TA Associates in India.
With offices in Boston, London, Menlo Park and Mumbai, TA Associates leads buyouts and minority recapitalisations of profitable growth companies in the technology, financial services, business services, healthcare and consumer industries. It was founded in 1968 and has invested in more than 400 companies and manages more than $16 billion of assets under management.