In one of its largest equity deals in the country, International Finance Corporation (IFC), the private sector investment arm of the World Bank, is picking around 12% stake in Polycab Wires for Rs 551.5 crore ($120 million). The deal values the flagship cable manufacturing business of Mumbai-based Jaisinghani family at Rs 4,600 crore ($1 billion).
The deal involves a mix of fresh shares and warrants. According to sources, IFC is picking a 10% stake for around Rs 450 crore besides picking warrants which would give it an additional 2% equity stake for around Rs 100 crore. These warrants will be fully paid and will be convertible based on achievement of certain financial milestones.
Polycab is one of the largest domestic players in the market for cables. It is the flagship company of the Polycab group, which has eight cable manufacturing companies and is the leading manufacturer of power cables and light duty cables in India. Besides manufacturing of insulated wires and cables, it is also engaged in manufacturing of optical fibre cables. The group has been clocking 25% annual growth in revenues.
Though the exact revenue of Polycab could not be ascertained, it is understood to have a topline of more than Rs 1,000 crore. The firm has an authorised share capital of Rs 80 crore with a paid up capital of Rs 60 crore. The shares are being placed at a premium of Rs 664 to the face value of Rs 10.
The firm is undertaking a capital expenditure program spread over the next two-three years at its existing production units. A part of the funds being raised will be used for making downstream investments in partnership firms of the group, including Bharat Cables, Polycab Industries and DK Plastic Industries. These partnership firms are being converted into companies.
IFC has largely been focusing on smaller deals in the $20-50 million bracket. However, it has also invested $100 million plus in a handful of companies, including Tata Steel, Cairn, HDFC, ICICI Bank and HDFC Bank.
Source: Economic Times