The deal involves a cash payment of Rs 600 cr and a preferential allotment of 7.5 m equity shares
Global private equity giant KKR has signed an agreement to transfer its entire stake in Dalmia Cement Bharat (DCBL), an unlisted subsidiary, to its parent, BSE and NSE listed Dalmia Bharat (DBL ).
The details of agreement which were notified to the exchanges on Friday involves a cash payment of R600 crore and a preferential allotment of 7.5 million equity shares by DBL to KKR at the rate of Rs 825 per share. With this KKR will become DBL’s largest institutional shareholder with close to 8.5% holding in DBL. Once the transaction is complete DCBL will become a 100% subsidiary of DBL, the company said in a statement.
At the current valuation KKR stands to make about Rs 1,219 crore on an investment of Rs 500 crore made six years ago. KKR had bought 14.5% stake in the Dalmia Bharat subsidiary in May 2010 for $165 million, making it one of the largest PE equity investments in India’s cement sector at that time.
“I feel that KKR has got a very good return on the investment given the prevailing market conditions back in 2010,” said Ajay Garg, managing director of Equirus Capital, which had advised KKR on the deal in 2010. The current deal values KKR’s stake at 2.5 times and brings an annualized return of 24% to the PE firm” Garg added.
According to sources, KKR was looking at an exit opportunity for sometime now and had appointed Avendus Capital (Avendus is now majority owned by KKR) to find a buyer for Dalmia stake. Industry sources say that Avendus was in talks with several other PE players but talks did not fructify for multiple reasons. Sources say that the preferential allotment to KKR by DBL comes with a one year lock in period, post which KKR will sell its holding in tranches. Since KKR’s investment, Dalmia Cements has completed four acquisition and undertaken several greenfield expansions. Dalmia Cements has an annual capacity of producing 24 million tonnes of cement from its 11 plants across India. It has a strong presence in north east and south part of India.