Pipe manufacturer Welspun Corp (formerly Welspun-Gujarat Stahl Rohren), which entered the infrastructure business by acquiring construction firm MSK Projects last year and boosted its capability by acquiring over a third of the Indian subsidiary of the Australian infrastructure major Leighton, is now consolidating its infra businesses.
It is merging its promoters’ privately held firm Welspun Infra Developers Pvt Ltd with its own wholly subsidiary Welspun Infratech. Welspun promoters, led by B K Goenka, are expected to own 35 per cent stake in the Welspun Infratech, pursuant to this transaction.
As of now, Welspun Infra Developers owns 40 per cent of Welspun Infra Projects Pvt Ltd that is, in turn, acquiring 35 per cent of Leighton Contractors (India) Pvt Ltd (Leighton International’s Indian operations) for a sum of Rs 470 crore. The balance 60 per cent is held by Welspun Infratech Ltd. The deal is being financed through Rs 250 crore as contribution by the two shareholders with the balance Rs 220 crore is coming as an external debt.
Going forward, the entire infrastructure development and contracting business of the group will be housed under Welspun Infratech. Welspun Infratech had earlier roped in Parvez Umrigar, as the MD & CEO of the company. Umrigar was the managing director of Gammon Infrastructure Projects Ltd and was instrumental in its growth as one of the key project developers in India. Last year, Welspun had used Welspun Infratech to acquire MSK Projects.
B K Goenka, chairman of Welspun Corp, said, “Looking at the tremendous opportunities in the infrastructure space, it is critical to create a corporate structure that will help us participate and capitalise on future opportunities in the world of infrastructure.”
The deal with Leighton is significant as it will enhance the bandwidth of the group in bagging contracts. The new company, which will be called Leighton Welspun, will pursue infrastructure opportunities in India, as well as in neighbouring countries like Sri Lanka. The joint venture plans to bid for projects in road, railways, power and ports which will be developed on a build, operate and transfer (BOT) basis.
In the joint venture, Welspun will concentrate on project development and bidding while Leighton will be responsible for project management and EPC. The Indian business of Leighton is said to have an order book of a little less than $1 billion, with interests in oil and gas, pipelines and other infrastructure projects on an EPC basis. Although it is a small part of its global portfolio at present, Leighton will be looking to boost this business, given the vast opportunities in the Indian infrastructure sector.