Private equity giant Warburg Pincus has agreed to invest $360 million (Rs 2,300 crore) for a 43% stake in Tata Technologies Ltd, the engineering outsourcing services arm of Tata Group, in its biggest deal in India.
The deal trumps Warburg’s $292 million bet on telecom operator Bharti Airtel Ltd via two tranches in 1999 and 2001, according to VCCEdge, the data research platform of VCCircle.
The transaction also takes the total amount the PE firm has committed to invest in India over the past year to almost $1.04 billion, VCCEdge data show. This includes $283 million in ICICI Lombard General Insurance, $77 million in Kalyan Jewellers India Ltd and about $120 million in multiplex chain PVR Ltd this year and $200 million in logistics companies Rivigo Services Pvt. Ltd and Stellar Value Chain Solutions Pvt. Ltd last year.
The latest deal involves Warburg Pincus buying about 30% of Tata Technologies from Tata Motors Ltd and its unit Sheba Properties Ltd and the entire 13% stake held by Tata Capital Ltd, the automaker said in a statement. Tata Capital’s Alpha TC Holdings Pte Ltd fund owns an 8.7% stake in Tata Technologies while Tata Capital Growth Fund I holds 4.3%.
Tata Motors and affiliates of Tata Group will retain about 43% in Tata Technologies. The company’s management and other shareholders will hold the remaining stake.
C Ramakrishnan, group CFO at Tata Motors, said the partial divestment is part of the automaker’s plan to strategically monetise the value created at Tata Technologies while also inducting a valuable partner for the next phase of growth.
Vishal Mahadevia, managing director and co-head of Warburg Pincus India, said that the PE firm will look to leverage its global network and prior experience in the engineering services sector to help grow Tata Technologies, both organically and through acquisitions.
Tata Technologies has about 8,500 employees in 23 countries. Its services portfolio combines engineering, research and development; product lifecycle management and connected enterprise IT solutions. The company last month acquired Swedish firm Escenda Engineering AB to accelerate its expansion in Europe.
Citigroup Global Markets India Pvt. Ltd acted as the sole financial adviser to Tata Motors and Tata Capital Investment Banking acted as the sole financial adviser to Tata Capital. The transaction is subject to customary regulatory approvals.
The private equity firm has $44 billion in assets under management. It invests globally in businesses at all stages of development with a focus on five key sectors: energy, financial services, healthcare and consumer, industrial and business services, and technology, media and telecommunications.
Founded in 1966, Warburg Pincus has raised 16 private equity funds that have invested about $60 billion in almost 780 companies in nearly 40 countries.
Warburg Pincus, which invests in India out of a global fund, had raised $12 billion in its latest flagship fund—Warburg Pincus Private Equity XII LP—in 2015.
In a major global development earlier this month, the private equity firm agreed to invest $300 million in Princeton Growth Ventures, a new platform that seeks to acquire assets in the telecommunications, media and technology infrastructure sector started by former Tata Communications Ltd executive Rangu Salgame.