Private equity funds like Bain, Blackstone and Carlyle, line up to pick stake in agri logistics firm National Collateral Management Services Ltd
- Tue, 2015-06-02 (All day)
- Mumbai, India
Global private equity funds Bain Capital, Blackstone, Carlyle, JP Morgan, Samara Capital and TPG have bid to acquire a significant minority stake in agri logistics company National Collateral Management Services Ltd.
"Global PE funds have put in a bid last Thursday; 26-49 per cent of the company is up for sale," an investment banker with direct knowledge of the deal said. According to sources, potential investors have put in bids valuing National Collateral Management Services Ltd, or NCML, between Rs.450-650 crore.
The company, however, is expecting a higher valuation of around Rs.750 crore, four people with direct knowledge of the deal told ET.
NCML —owned by a number of investors including Rabo Equity Advisors, IFC and Indian Farmers Fertiliser Cooperative Ltd, or IFFCO — has mandated investment bank Kotak MahindraBSE -1.20 % Capital Co to look for potential stake buyers.
"The company will also raise some amount of primary capital too through this round," a person involved in the deal said.
An email questionnaire sent to spokespersons of Bain, Blackstone, Carlyle, Samara and TPG did not elicit response as of press time on Monday. A JP Morgan spokesperson declined comment. Sanjay Kaul, managing director and chief executive of NCML, in response to emailed queries, said, "We deny this story. The contents have no basis whatsoever."
Started in 2004, NCML has one of the largest networks of 800 warehouses situated in around 12 states through which it manages around 42 agricultural commodities. Besides farm products logistics, it also offers storage services for non-agricultural commodities and inventories to growers, traders, processors, importers and exporters, overseas buyers and sellers, commodity exchanges, exchange traders and government agencies.
In 2011, Rabo Bank's private equity arm Rabo Equity Advisors invested $7.5 million, or about Rs.48 crore at current conversion rate, in NCML when the firm raised $18.5 million, approximately Rs.118 crore, with the rest of the equity funding coming from IFC and IFFCO.
Rabo, IFFCO and IFC increased investments subsequently via incremental investments. Rabo now holds around 25 per cent stake in NCML.
Agri logistics and warehousing firms are in great demand among global investors. Last year, India Value Fund Advisors, the country's largest domestic PE fund, bought out National Bulk Handling Corp, a warehousing company, for Rs.241 crore from the FT Group. In 2013, Tano Capital invested Rs.80 crore in Shree Shubham Logistics.
"Agri logistics is the most scalable business in India. With around 45 per cent of farm produce getting wasted due to unavailability of timely transport to the market, there is a greater need for efficient logistics companies," a global consultant said on condition of anonymity.
According to various industry reports, the long distribution chains lead to time and produce wastage, estimated at Rs.85,000 crore a year.
"The long chain of intermediaries between the farmer and the market adds cost but no value to the product. The escalation in the cost of the produce is to an extent of 250 per cent of the cost of production at the farm level," said a report by Shreehari Lath, chief financial officer of Star Agri Warehousing & Collateral Management Ltd.
"Poor front end infrastructure, such as storage facilities, improper warehousing facilities, redundant food processing technology and the farmers' inaccessibility to value-added services, results in wastage of 40 per cent of the fruits and vegetables," the report said.
Besides Rabo, IFFCO and IFC, other investors in NCML include Karur Vysya Bank, The Haryana State Cooperative Supply and Marketing Federation Ltd, NCDEX, Punjab National Bank, Corporation Bank, Bank of India, Canara Bank, HDFC Bank, ACE Geneva, Indian Bank and YES Bank.
The firm serves clients such as Adani Enterprises, Cargill India, ITC, Louis Dreyfus Commodities and Ruchi Soya.