Tata Capital's flagship private equity investment vehicle Tata Opportunities Fund (TOF) has invested Rs 335 crore ($55 million) to buy a significant minority stake in Tata Projects Ltd (TPL), an engineering, procurement and construction (EPC) services company from other Tata group firms it said on Monday.
It bought the stake in a secondary deal from Tata Steel, Tata Motors, The Indian Hotels Company and Tata International. These companies had subscribed to the shares of the group firm when it was started way back in 1979.
The PE firm will appoint a nominee to the board of the privately held EPC firm.
Formed in 1979, Hyderabad-headquartered Tata Projects provides solutions to set up power generation plants, power transmission and distribution systems, fully integrated rail and metro systems, commercial buildings and airports, chemical process plants, water and waste water management solutions, mining and metal purification systems.
For FY15, Tata Projects posted revenues of Rs 3,444 crore with PBDIT of Rs 295 crore and an order book of over Rs 16,000 crore ($2.6 billion).
"We have maintained a strong balance sheet and this partnership bolsters our ability to raise additional financial resources, when required," said Vinayak Deshpande, CEO and MD of Tata Projects.
"The fund believes that EPC companies will be early beneficiaries of an increase in capital spending in India. Tata Projects is one of a few EPC companies with low leverage given its ‘pure-play’ services focus and financial discipline, and is well placed to grow profitably," said Padmanabh Sinha, managing partner of the TOF’s advisory team in India.
TOF, a fund managed by Tata Capital's PE unit, had raised $600 million in 2013 with a mandate to back other Tata Group firms besides some other external companies.
Recently, it signed agreement to invest up to Rs 250 crore ($39 million) for a minority stake in TVS Logistics Services Ltd.
It has backed other companies like Tata's budget hotel chain Ginger, DTH venture Tata Sky besides auto component maker Varroc and Shriram Properties in the past.