Toshiba to buy 26% stake in IVFA-controlled water management solutions firm UEM

Japanese electrical major Toshiba Corporation is picking 26 per cent stake in UEM India Pvt Ltd, which provides turnkey services in the water and wastewater collection, treatment and disposal.

India Value Fund Advisors (IVFA) had picked a controlling stake in UEM few years ago and will continue to hold a majority stake post the strategic investment. However, this transaction paves a way for an exit in the future.

VCCircle had first reported that Toshiba is acquiring a stake in UEM India on December 16, 2013.

Toshiba said the entire investment will be infused into the firm to drive future growth with expansion into newer geographies and access better technologies to augment its business. The deal involves primary issue and there are no sellers.

The stake has been picked up for around $20 million or Rs 125 crore valuing UEM India at around $77 million or Rs 480 crore.

When IVFA had originally invested, it had picked effectively 70 per cent stake in UEM for around Rs 90 crore in July 2010 through a mix of shares and debentures. With the latest transaction its stake will dilute to around 51 per cent which would be worth Rs 240 crore giving it unrealised gains of around 2.7x on its investment, as per VCCircle estimates.

Vishal Nevatia, managing partner of IVFA, said, "The company (UEM) has outperformed its peers in the infrastructure sector and continues to have a very robust order book."

IVFA has raised four PE funds till date with total corpus of over $1.2 billion. Currently, it is investing out of IVF - IV, which has a corpus of $600 million.

“This is a strategic growth area for Toshiba and we will bring our expertise and global access to the company, and also learn from UEM's vast experience in delivering complex, turn-key projects around the world,” Naohiro Noro, Vice President, Water & Environmental Systems Division, Toshiba Corp, said.

The Japanese company will be the second largest shareholder in the Indian company. An executive of Toshiba will also be joining the board of UEM.

UEM Group—founded in 1973 by Krishan Kshetry—provides turnkey services in water and wastewater collection, treatment and disposal. The company has annual revenue of $70 million or over Rs 400 crore, has so far executed over 350 projects in 30 nations, including Kenya, Taiwan, Thailand, Nepal, Indonesia, Malaysia and Sri Lanka.

It has over 750 employees, with the core design team based in Noida. It has delivered projects in sectors such as oil & gas, power, breweries and tanneries, with clients that include ONGC, IOC, NTPC, Coca-Cola, P&G, Bristol-Myers Squibb and various government bodies. The company has also been involved with projects funded by multilateral bodies, like the World Bank and the Asian Development Bank.

Since IVFA picked controlling stake in the firm its revenues have increased from little less than Rs 100 crore to over Rs 400 crore now. Soon after investing in the firm, the PE investor brought in former KEC International and Alstom executive Rajkumar Gupta as CEO.

For Toshiba, this comes as back to back transaction in India, that too related to a PE backed firm. It has also completed the previously announced transaction where it has bought 3i-backed Vijai Electricals Ltd's transmission and distribution (T&D) business. The acquired assets include power transformer, distribution transformers and switchgear businesses.

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