INDIA BUSINESS WORLD - March 1^st - March 15^th - 2008

BLACKSTONE BUYS STAKE IN TITAGARH WAGONS FOR RS 16 CR

The US-based private equity fund Blackstone has picked up a minority stake in Titagarh Wagons for Rs 672 a share in a pre-IPO placement. The transaction puts the valuation of the company at over Rs 1,200 crore and is expected to act as a benchmark for the pricing of the company's forthcoming IPO.

Kolkata-based Titagarh Wagons will sell 23.8 lakh shares in the primary market through an entirely book-building issue. The company will sell 20.68 lakh fresh shares while two investors will offer 3.15 lakh shares through the issue. It may announce the price band for the issue in a few days.

Blackstone is the fifth major investor to put in money in Titagarh Wagons. The other investors include GE Capital Infrastructure (15%), JP Morgan (5%), 2i Capital (6%) and ChrysCapital (6.5%). The Chowdharys, the promoters, hold a 57% stake.

It is learnt that Blackstone has bought nearly 2.35 lakh shares for around Rs 16 crore from the Strategic Ventures Fund (Mauritius). The Mauritius-based company bought equity in Titagarh in July 2005 for Rs 976 a share. But its acquisition cost came down, following an 1:8 bonus issue. The bonus issue also brought down the average cost of acquisition of shares by the promoters to Rs 1.1 apiece. When contacted, Titagarh Wagons MD Umesh Chowdhary declined to comment.

Titagarh Wagons is a leading railway freight wagon manufacturer. It makes railway wagons, balley bridges, heavy earth moving and mining equipment, steel and SG iron castings. It is one of the approved vendors for defence manufacturing, as an 'industry partner' to the Defence Research and Development Organisation (DRDO), and also manufactures other products for the Indian defence establishment, such as special purpose wagons, shelters and other engineering equipment.

The company has acquired the heavy engineering division of Hyderabad Industries and gained a foothold in earthmoving equipment.

Titagarh Wagons' share in the domestic wagon making industry has gone up to 22% last year from 17% in 2006. It has two manufacturing facilities at Titagarh and Uttarpara in West Bengal. In FY07, the company posted a total income of Rs 284 crore and profit before tax (PBT) of Rs 45 crore.

Over the past four years, its total income and profit before tax showed a CAGR of 57% and 76%, respectively. It dispatched 2,073 wagons last year and has an order book of Rs 762 crore.