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Corporate
SABARINATH M & ARIJIT BARMANMUMBAI
Baring Private Equity Asia Grouphas emerged as the front runnerto pick up a strategic 14-15% stake
in Lafarge India, the Indian arm of La-farge — the world’s largest building-materials company — for $261 million(.̀ 1,407 crore), said multiple sources di-rectly involved in the transaction. Thedeal values the Indian arm of theFrench cement multinational at €1.5billion and will help in funding its ongo-ing .̀ 6,000-crore capex programme at atime when the parent company is undersevere pressure to restructure its busi-ness and reduce the high leverage on itsconsolidated books.
This transaction may also trigger a newtrend among local subsidiaries of simi-lar-sized global corporations to try andraise funds locally in growth markets ifthe parent battles larger corporate stress.Baring officials are currently at the Parisheadquarters of Lafarge, negotiating thefinal contours of the deal. “There is atleast a 15-20% difference between theBaring offer and the other bidders,” saidone of the sources. “By the end of thisweek, they should be able to come to aconclusion. Some of the other biddershave already been told their offers are notaggressive enough,” he added.
Singapore’s sovereign investment
fund Temasek has emerged as the sec-ond highest bidder after Baring Asia.“Temasek has been seriously pursuingthis deal, but in the end their bid has notbeen as aggressive as Baring,” addedanother official on condition of ano-nymity. “Temasek does not comment onmarket speculation or rumours,” Ste-phen Forshaw, a Temasek spokespesr-son told ET.
The cement sector has witnessed slug-gish growth from the real estate and con-struction sectors, while margins haveshrunk due to high fuel and transporta-tion costs. But there has been a renewedexpectation of a revival in demand onthe back of the government’s push to ex-pedite infrastructure projects.
REVISED OUTLOOK
Private equity firms too are revisingtheir outlook on the industry. Some lead-ing firms in the industry are in advancednegotiations with some key players.Blackstone is in talks with Sree Jaya-jyothi Cements in Andhra Pradesh, whileABG Cements wants to raise money tofund its cement operations in Gujarat.Even Binani Cement is looking at divest-ing 40% stake to financial investors. Dal-mia Cement, in which KKR had picked upa16% in 2010, later acquired Adhunik Ce-ment and Calcom Cement. But while theKKR structured transaction was done ata $130 per tonne valuation, the Lafarge
deal — at $210 per tonne valuation — is ata significant premium and may set a newbenchmark. “Despite the brand equityand scale of operations, Baring Asia is of-fering a rich premium. They may find ittough to get an upside from here,” said aninvestment banker, specialising in ce-ment deals. Singapore’s sovereign invest-ment fund Temasek and bulge bracketmarque funds Carlyle and Advent werethe others in final shortlist. StandardChartered PE was also expected to put ina bid. Lafarge has assured a 15% IRR andwill buy back the shares of its Indian armfrom Baring within five years. However,the fund is not likely to have a put option,thereby barring them from selling thesame shares of a rival cement company.
A Baring Asia spokesperson RichardBarton declined to comment on marketspeculation. Lafarge India spokesper-son said: “We do not want to commenton market speculation.” Lazard is theadvisor to Lafarge, while law firm Wa-dia Gandhi is assisting Baring Asia.Khaitan & Co is Temasek’s legal advi-sor. Since last year, Lafarge has beenrestructuring its global operationsthrough a series of asset sales to pare itsdebt to ¤10 billion from ¤12.2 billion af-ter a 2007 purchase of Orascom led tothe loss of its investment-grade creditrating last year.
Baring Leads Race for Lafarge Stake At an expected $261 m for the 15% stake, deal values the Indian arm at €1.5 b
OUR BUREAUNEW DELHI
Bharti Infratel, the tower arm ofBharti Airtel, has reported a 34%increase in quarterly profit andsaid it will talk to Mukesh Amba-ni-owned Reliance Jio Infocommfor leasing out its towers. “As atower company, it is my job to go toevery operator, existing as well asprospective. We would definitelybe in talks with them and wewould like to do more businesswith them,” Bharti Infratel vice-chairman and MD Akhil Guptasaid on Tuesday. “At this momentno contract has been signed, butwe will approach them.”
Bharti Infratel’s profit for thefourth quarter ended March rose34.3% from a year ago to .̀ 287crore. Revenue for the quartergrew 11.3% to .̀ 2,674 crore com-pared with the same period a yearago. For the full year, it reported aprofit of .̀ 1,003 crore, up 33.8%from 2011-12. Revenue improvedby 8.7% to .̀ 10,272 crore.
Bharti Infratel now owns 82,083towers across the country with anaverage tenancy of 1.91 per tower.For the fourth quarter, its averagemonthly revenue per tower was.̀ 66,919, marginally lower than.̀ 67,136 in the previous quarter.Consolidated operating cash flowfor the quarter was 11% lower thanthe year-ago period at .̀ 494 crore onaccount of higher capital expendi-ture. Bharti Infratel has proposed afull-year dividend of .̀ 4 per share.
Bharti InfratelPosts 34% Risein Net, WeighsTie-up with Jio
OUR BUREAUKOLKATA
Reliance Industries’ (RIL) telecom arm Re-liance Jio Infocomm, has teamed up withUK’s Vodafone Group and a clutch of lead-ing global carriers to build a subsea cablenetwork linking Southeast Asia and theMiddle East. This is the second cable dealfor RIL which had recently reached anagreement with Bharti Airtel for band-width on the latter’s i2i submarine cablesystem that connects Chennai to Singa-pore. Reliance Jio is also the only Indiantelecom operator to participate in the sub-marine cable system consortium.
Involvement in building the proposedsubmarine cable system is strategic to Re-liance Jio Infocomm’s long-term broad-band ambitions as it prepares to launchfourth-generation (4G) services later thisyear. “The 8,000-km Bay of Bengal Gate-way, or ‘BBG’, undersea cable system link-ing Malaysia and Singpapore with the Mid-dle East will have connections to India andSri Lanka,” RIL said on Tuesday. The cablesystem is slated to carry commercial traf-fic by end-2014, the company added.
Other members of the global consortiuminclude Telekom Malaysia, Omantel, Eti-salat and Sri Lanka-based Dialog Axiata.
The proposed BBG subsea cable systemwill also extend to Europe, Africa and thefar East through interconnections withother existing and newly built cable sys-tems landing in India and Middle East.
“It will serve as an extraordinary oppor-tunity for business growth as it will helpsupporting current and future high (band-
width) capacity requirements from sur-rounding areas of the region as well asnextgen internet applications,” said RIL.Construction of this undersea cable sys-tem is a clear indication of growing de-mand for bandwidth in participating coun-tries. “The markets are expected to seestrong growth with the continuous effortsin embracing broadband technologies andinfrastructure expansion,” added the com-pany statement.
Reliance Jio Infocomm is the sole Indiantelco with a nationwide 4G permit to offerhigh-speed wireless broadband serviceswhich are expected to be launched laterthis year. The company has tied up withSamsung, Huawei and ZTE for 4G radiogear for its launch. But the end devices us-ing LTE 4G technology in the 2,300 MHz fre-quency are still few and far between.
Reliance Jio Joins Global
Consortium to Build
Undersea Cable Network
System will link Southeast Asia and Middle
East with connection points in India, Lanka
HARSIMRAN JULKABANGALORE
The Centre has announced ascheme through which itwill provide financial sup-port to young technologycompanies filing interna-tional patents, a move thatunderscores the growingsupport for emerging ven-tures in the country.
The five-year scheme thatcomes into force from thisfiscal year will provide halfthe amount incurred in fil-ing a patent and reimburse
fees paid to an attorney, ac-cording to an official in theMinistry of Communica-tions and Information Tech-nology. “We will bear allcosts up to a limit of .̀ 15 lakhfor each patent application,”said the person who did notwish to be identified.
Technology ventures thathave an annual budget below.̀ 10 crore for R&D will quali-fy for this scheme. The moveis being welcomed by entre-preneurs who say the highcost of filing patents hasbeen a major deterrent.
Govt to Part-finance Startups’Spend on Filing for Int’l Patents
Cementing A DealFinal bidders for Lafarge India: Temasek, Advent, Carlyle
8 MT:
Current capacity
`6000 cr
capex lined up
Globally, co is under severe
pressure to restructure its
business and reduce the
high leverage on its consoli-
dated books
Deal may lead to similar
sized global cos raising
funds locally in growth
markets
Blackstone is in talks with
Sree Jayajyothi Cements
ABG Cements wants to
raise money to fund its ce-
ment operations in Gujarat
Binani Cement is looking
at divesting 40% stake to
financial investors
Cement sector has wit-
nessed sluggish demand
and margins have shrunk
due to high transport costs
But there’s hope of revival
on the back of govt’s push
to expedite infra projects
Sector Overview
Lafarge: Indian Odyssey
2001
Bought Raymond’s
cement biz
2008
Acquired L&T’s concrete
business for $349 million
Entered India in 1999,
acquiring Tata Steel’s
cement biz
Cement Cos on Selling Spree
SANDEEP
