Leading private equity (PE) firms such as Blackstone, TPG, Blue River Capital, Actis and Silk Route are eyeing more than a 40% stake in agri-processing firm Usher Agro, it is learnt.
The deal, if concluded, will pave the way for the PE investor to acquire management control with a majority stake. In that case, it will be third instance where a PE investor is taking control of a listed company in the recent past.
Broad contours of the plan suggest that Usher will raise funds by issuing new shares to the PE investor.
It will also sell shares of its four subsidiaries in the power, logistics, credit finance and oil and food segments. The promoters and some existing investors plan to sell some portions of their equity to encash their holding.
The total fund mobilisation is pegged at Rs 250-300 crore. On Monday, the shares of Usher Agro were up by 3.63% to close at Rs 201 on the Bombay Stock Exchange (BSE), putting the market capitalisation at Rs 360 core.
When contacted, Usher Agro managing director Vinod Kumar Chaturvedi said, “We have outlined a huge expansion plan for Usher Agro and its subsidiary. We are in the process of raising funds.
We are weighing various options including PE investments. Various funds have shown keen interest. However, we cannot reveal any specifics now.” The company is implementing a Rs 300 crore expansion plan.
“Now, the valuations are comparatively low. We see a strong potential in the Indian agro sector. We are evaluating the Usher Agro proposal,” said a senior official with a PE fund.
If the deal goes through, the successful PE investor will have to launch a mandatory 20% open offer, which may scale up the buyer’s stake to as high as 60%. The promoters stake will shrink on expanded equity.
At present, the promoters hold around 38% stake in Usher Agro, while individual investors and corporate bodies together control a 43% stake in the company. Foreign Institutional Investors hold 14.50% equity.
Usher Agro is a processor of non-basmati rice and wheat with an annual installed capacity of 57,600 MT and 75,000 MT respectively. The company plans to add 1.94 lakh MT of rice milling capacity by 2008 and raise it by another 1 MT by January 2010.
Post the expansion, Usher may emerge as the second largest rice processing company. Analysts said that basmati rice constitutes just 2% of the total industry volume in India.
The lack of scale in the basmati space prevents basmati manufactures from moving further downstream in the rice processing value chain which can substantially improve the profitability of the rice processor.
Usher also plans to scale up its wheat processing capacity by another 3 lakh MT per annum by 2009. Usher has formed an associate company, Usher Eco Power to set up a 16 mw husk-based power plant at its planned 1 MT rice processing facility at Chatta in UP.
Usher Agro signed an MoU with Japan’s Satake Corporation last month for expanding its rice milling capacity by another 1MT. Under the deal, Satake will provide Usher Agro the plant and machinery for the interest-free credit period of three years.
Source: Economic Times