INDIA BUSINESS WORLD - AUGUST 2006
THE MONTH THAT WAS...

GOLDMAN SACHS TAKES 10% IN CREMICA

PRIVATE equity is on its way to the hinterlands. Goldman Sachs has taken a 10% stake in Ludhiana-based Cremica, valuing the company at Rs 500 crore. The deal was signed couple of days back, and some "formalities" remain, according to Akshay Bector, MD, Cremica. He said the company will use the moolah for fresh acquisitions and organic growth. "Cremica has been valued preciously. Overall it's good deal," Rajni Bector, founder of the Cremica group.

About a month ago that negotiations were going on between the Mumbai-based arm of the global PE firm and the Ludhiana company. The group was established in 1978 as a small backyard enterprise that grew into a diversified food products company with an annual sales figure of Rs 1 billion, growing at a rate of 30%.

For Ludhiana , the Bector deal may just the beginning. Many more companies from Punjab's industrial heartland, including auto majors like Sonalika group, DCM Engineering, components leader Guru Nanak Automobiles (GNA), Supreme Yarns and Industrial Organics, are in various stages of negotiations with leading Mumbai-based PE players.

International Tractors is in advanced stages of negotiations to disinvest 8-10% stake to a private equity firm. That will be the fourth such partnership for ITL, which has given 10% stakes each to Citigroup and 3i, while Japanese tractor maker Yanmar owns 12% of the company.

LD Mittal, chairman, ITL: "We will be finalising the deal in a month. But we cannot disclose the names of firms we are in negotiations with now. We may do the same in case of ICML, another company of the Sonalika group."

Industrial Organics MD Varinder Gupta said: "We are in negotiations with several PE fund players from Mumbai, Pune and Delhi . We can crack the deal any time."

Keshav Sachdev, ED & CEO, DCM Engineering, said: "We plan to set up another foundry with an investment of Rs 150 crore. We are evaluating the options through private equity as well."

GNA's Param Jeet Singh said PE players are asking for 26 % shares of the company. “Ours is a closely held company and we are evaluating the options," he said.

After getting into PE partnerships, these companies may come out with public issues as the value of shares can be quite high after such partnerships. In fact, some companies which were earlier planning for IPOs, too are aiming for private equity right now.

Said Pritpal Singh, GM, Ludhiana Stock Exchange Securities : "Companies have to raise the funds in any case and are going for private equity. The plans for an IPO may have been halted for few months but tomorrow when the same company comes with an IPO, the other players having equity of such companies will have an edge."