A clutch of leading private equity giants such as Blackstone are in the race to acquire a minority stake in Nusli Wadia's Bombay Dyeing, reported ET. There is growing buzz in the market that the Wadias are looking at shedding less than a 15% stake to private equity funds. People close to the situation said that Bombay Dyeing, which needs money to expand its real estate and airlines business, along with its planned forays into retail, may consider the private equity route as one option for raising money.
A Bombay Dyeing spokesperson categorically denied any plans to rope private equity investors into the company. When quizzed if private equity giant Blackstone is the frontrunner, a senior executive of the company said: "We have not even had a cup of coffee with anyone in Blackstone at any level." Akhil Gupta, chairman and managing director of Blackstone India, said: "We have signed confidentiality agreements with several people. I cannot comment on the individual specifics of the deal."
People close to Bombay Dyeing say that the Wadia family, which has never shared equity with outside investors in any of its old core companies, will have the final say in determining the transaction's success. The deal may not happen if the terms are too onerous or if the Wadia family feels that money can be easily obtained through other means such as a rights issue. It seems the markets are already abuzz with all the deal-talk. Bombay Dyeing shares rose 2.28% on Wednesday to close at Rs 628.45. The shares have gained 8.75% over the week and 14.27% over the past month. A deal at currently market price will fetch the company about Rs 400 crore. The firm's market value is is now at about Rs 2,424 crore.
The fund infusion in the company - through a private equity deal, a rights issue or any other means of financing - is expected to help Bombay Dyeing revamp its textile business and develop its real estate properties. The firm plans to invest Rs 1,500 crore in developing a slew of real estate projects in Mumbai. Bombay Dyeing, once a strong player in the textile business, suffered when DMT, its main product, was overtaken by PTA as the main raw material for the polyester industry. Add to that, insufficient growth in the fabric and garment business and its sales fell to Rs 507 crore for the year ended March while profit nearly halved to Rs 35 crore. The first quarter ended June 2007 has been better, and finding cash for its future businesses is now key to the group's success - which includes its forays into the airline and retail businesses. Bombay Dyeing is also ramping up its distribution network and scouting for local and international brand acquisitions to move up the value chain.
Private equity's role, atleast in India, has been restricted to new sectors such as technology, financial services, pharmaceuticals, media etc. Hungry for capital and striving to keep up in a hyper competitive world, traditional business groups are readily welcoming the private equity moneybags with their seemingly limitless supply of cash. Blackstone stunned the industry recently by buying out Gokaldas Exports, the Bangalore-based textile exporter for about $ 165 million. This was Blackstone's sixth investment in India. The first was in July 2006, when it put $ 50 million into Emcure Pharmaceuticals. In January, it invested $ 275 million in the media and food production/distribution business, Ushodaya Enterprises. In June, it acquired business process outsourcing company Intelenet Global for an estimated $ 400 million. New York-based Blackstone set up an office in Mumbai in June 2005. It is looking at potential returns of around 20% from its investments in Indian firms across a range of industries.
A Bombay Dyeing spokesperson categorically denied any plans to rope private equity investors into the company. When quizzed if private equity giant Blackstone is the frontrunner, a senior executive of the company said: "We have not even had a cup of coffee with anyone in Blackstone at any level." Akhil Gupta, chairman and managing director of Blackstone India, said: "We have signed confidentiality agreements with several people. I cannot comment on the individual specifics of the deal."
People close to Bombay Dyeing say that the Wadia family, which has never shared equity with outside investors in any of its old core companies, will have the final say in determining the transaction's success. The deal may not happen if the terms are too onerous or if the Wadia family feels that money can be easily obtained through other means such as a rights issue. It seems the markets are already abuzz with all the deal-talk. Bombay Dyeing shares rose 2.28% on Wednesday to close at Rs 628.45. The shares have gained 8.75% over the week and 14.27% over the past month. A deal at currently market price will fetch the company about Rs 400 crore. The firm's market value is is now at about Rs 2,424 crore.
The fund infusion in the company - through a private equity deal, a rights issue or any other means of financing - is expected to help Bombay Dyeing revamp its textile business and develop its real estate properties. The firm plans to invest Rs 1,500 crore in developing a slew of real estate projects in Mumbai. Bombay Dyeing, once a strong player in the textile business, suffered when DMT, its main product, was overtaken by PTA as the main raw material for the polyester industry. Add to that, insufficient growth in the fabric and garment business and its sales fell to Rs 507 crore for the year ended March while profit nearly halved to Rs 35 crore. The first quarter ended June 2007 has been better, and finding cash for its future businesses is now key to the group's success - which includes its forays into the airline and retail businesses. Bombay Dyeing is also ramping up its distribution network and scouting for local and international brand acquisitions to move up the value chain.
Private equity's role, atleast in India, has been restricted to new sectors such as technology, financial services, pharmaceuticals, media etc. Hungry for capital and striving to keep up in a hyper competitive world, traditional business groups are readily welcoming the private equity moneybags with their seemingly limitless supply of cash. Blackstone stunned the industry recently by buying out Gokaldas Exports, the Bangalore-based textile exporter for about $ 165 million. This was Blackstone's sixth investment in India. The first was in July 2006, when it put $ 50 million into Emcure Pharmaceuticals. In January, it invested $ 275 million in the media and food production/distribution business, Ushodaya Enterprises. In June, it acquired business process outsourcing company Intelenet Global for an estimated $ 400 million. New York-based Blackstone set up an office in Mumbai in June 2005. It is looking at potential returns of around 20% from its investments in Indian firms across a range of industries.
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Bombay Dyeing Media Statement
In light of speculative articles in the media about the possible investment in Bombay Dyeing by private equity players, The Bombay Dyeing & Manufacturing Co. Ltd. would like to categorically state that these reports are baseless, speculative and untrue. A similar note has been shared with the Bombay Stock Exchange & National Stock Exchange respectively this afternoon – September 13th 2007.
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