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Corporate
SABARINATH M & ARIJIT BARMAN
MUMBAI
B
aring Private Equity Asia Group
has emerged as the front runner
to pick up a strategic 14-15% stake
in Lafarge India, the Indian arm of La-
farge the worlds largest building-
materials company for $261 million
(. `1,407 crore), said multiple sources di-
rectly involved in the transaction. The
deal values the Indian arm of the
French cement multinational at 1.5
billion and will help in funding its ongo-
ing . `6,000-crore capex programme at a
time when the parent company is under
severe pressure to restructure its busi-
ness and reduce the high leverage on its
consolidated books.
This transaction may also trigger a new
trend among local subsidiaries of simi-
lar-sized global corporations to try and
raise funds locally in growth markets if
the parent battles larger corporate stress.
Baring officials are currently at the Paris
headquarters of Lafarge, negotiating the
final contours of the deal. There is at
least a 15-20% difference between the
Baring offer and the other bidders, said
one of the sources. By the end of this
week, they should be able to come to a
conclusion. Some of the other bidders
have already been told their offers are not
aggressive enough, he added.
Singapores sovereign investment
fund Temasek has emerged as the sec-
ond highest bidder after Baring Asia.
Temasek has been seriously pursuing
this deal, but in the end their bid has not
been as aggressive as Baring, added
another official on condition of ano-
nymity. Temasek does not comment on
market speculation or rumours, Ste-
phen Forshaw, a Temasek spokespesr-
son told ET.
The cement sector has witnessed slug-
gish growth from the real estate and con-
struction sectors, while margins have
shrunk due to high fuel and transporta-
tion costs. But there has been a renewed
expectation of a revival in demand on
the back of the governments push to ex-
pedite infrastructure projects.
REVISED OUTLOOK
Private equity firms too are revising
their outlook on the industry. Some lead-
ing firms in the industry are in advanced
negotiations with some key players.
Blackstone is in talks with Sree Jaya-
jyothi Cements in Andhra Pradesh, while
ABG Cements wants to raise money to
fund its cement operations in Gujarat.
Even Binani Cement is looking at divest-
ing 40% stake to financial investors. Dal-
mia Cement, in which KKR had picked up
a16% in 2010, later acquired Adhunik Ce-
ment and Calcom Cement. But while the
KKR structured transaction was done at
a $130 per tonne valuation, the Lafarge
deal at $210 per tonne valuation is at
asignificant premium and may set a new
benchmark. Despite the brand equity
and scale of operations, Baring Asia is of-
fering a rich premium. They may find it
tough to get an upside from here, said an
investment banker, specialising in ce-
ment deals. Singapores sovereign invest-
ment fund Temasek and bulge bracket
marque funds Carlyle and Advent were
the others in final shortlist. Standard
Chartered PE was also expected to put in
abid. Lafarge has assured a 15% IRR and
will buy back the shares of its Indian arm
from Baring within five years. However,
the fund is not likely to have a put option,
thereby barring them from selling the
same shares of a rival cement company.
A Baring Asia spokesperson Richard
Barton declined to comment on market
speculation. Lafarge India spokesper-
son said: We do not want to comment
on market speculation. Lazard is the
advisor to Lafarge, while law firm Wa-
dia Gandhi is assisting Baring Asia.
Khaitan & Co is Temaseks legal advi-
sor. Since last year, Lafarge has been
restructuring its global operations
through a series of asset sales to pare its
debt to 10 billion from 12.2 billion af-
ter a 2007 purchase of Orascom led to
the loss of its investment-grade credit
rating last year.
sabarinath.muralidharan@timesgroup.com
Baring Leads Race for Lafarge Stake
At an expected $261 m for the 15% stake, deal values the Indian arm at 1.5 b
OUR BUREAU
NEW DELHI
Bharti Infratel, the tower arm of
Bharti Airtel, has reported a 34%
increase in quarterly profit and
said it will talk to Mukesh Amba-
ni-owned Reliance Jio Infocomm
for leasing out its towers. As a
tower company, it is my job to go to
every operator, existing as well as
prospective. We would definitely
be in talks with them and we
would like to do more business
with them, Bharti Infratel vice-
chairman and MD Akhil Gupta
said on Tuesday. At this moment
no contract has been signed, but
we will approach them.
Bharti Infratels profit for the
fourth quarter ended March rose
34.3% from a year ago to . `287
crore. Revenue for the quarter
grew 11.3% to . `2,674 crore com-
pared with the same period a year
ago. For the full year, it reported a
profit of . `1,003 crore, up 33.8%
from 2011-12. Revenue improved
by 8.7% to . `10,272 crore.
Bharti Infratel now owns 82,083
towers across the country with an
average tenancy of 1.91 per tower.
For the fourth quarter, its average
monthly revenue per tower was
. `66,919, marginally lower than
. `67,136 in the previous quarter.
Consolidated operating cash flow
for the quarter was 11% lower than
the year-ago period at . `494 crore on
account of higher capital expendi-
ture. Bharti Infratel has proposed a
full-year dividend of . `4 per share.
Bharti Infratel
Posts 34% Rise
in Net, Weighs
Tie-up with Jio
OUR BUREAU
KOLKATA
Reliance Industries (RIL) telecom arm Re-
liance Jio Infocomm, has teamed up with
UKs Vodafone Group and a clutch of lead-
ing global carriers to build a subsea cable
network linking Southeast Asia and the
Middle East. This is the second cable deal
for RIL which had recently reached an
agreement with Bharti Airtel for band-
width on the latters i2i submarine cable
system that connects Chennai to Singa-
pore. Reliance Jio is also the only Indian
telecom operator to participate in the sub-
marine cable system consortium.
Involvement in building the proposed
submarine cable system is strategic to Re-
liance Jio Infocomms long-term broad-
band ambitions as it prepares to launch
fourth-generation (4G) services later this
year. The 8,000-km Bay of Bengal Gate-
way, or BBG, undersea cable system link-
ing Malaysia and Singpapore with the Mid-
dle East will have connections to India and
Sri Lanka, RIL said on Tuesday. The cable
system is slated to carry commercial traf-
fic by end-2014, the company added.
Other members of the global consortium
include Telekom Malaysia, Omantel, Eti-
salat and Sri Lanka-based Dialog Axiata.
The proposed BBG subsea cable system
will also extend to Europe, Africa and the
far East through interconnections with
other existing and newly built cable sys-
tems landing in India and Middle East.
It will serve as an extraordinary oppor-
tunity for business growth as it will help
supporting current and future high (band-
width) capacity requirements from sur-
rounding areas of the region as well as
nextgen internet applications, said RIL.
Construction of this undersea cable sys-
tem is a clear indication of growing de-
mand for bandwidth in participating coun-
tries. The markets are expected to see
strong growth with the continuous efforts
in embracing broadband technologies and
infrastructure expansion, added the com-
pany statement.
Reliance Jio Infocomm is the sole Indian
telco with a nationwide 4G permit to offer
high-speed wireless broadband services
which are expected to be launched later
this year. The company has tied up with
Samsung, Huawei and ZTE for 4G radio
gear for its launch. But the end devices us-
ing LTE 4G technology in the 2,300 MHz fre-
quency are still few and far between.
Reliance Jio Joins Global
Consortium to Build
Undersea Cable Network
System will link Southeast Asia and Middle
East with connection points in India, Lanka
HARSIMRAN JULKA
BANGALORE
The Centre has announced a
scheme through which it
will provide financial sup-
port to young technology
companies filing interna-
tional patents, a move that
underscores the growing
support for emerging ven-
tures in the country.
The five-year scheme that
comes into force from this
fiscal year will provide half
the amount incurred in fil-
ing a patent and reimburse
fees paid to an attorney, ac-
cording to an official in the
Ministry of Communica-
tions and Information Tech-
nology. We will bear all
costs up to a limit of . `15 lakh
for each patent application,
said the person who did not
wish to be identified.
Technology ventures that
have an annual budget below
. `10 crore for R&D will quali-
fy for this scheme. The move
is being welcomed by entre-
preneurs who say the high
cost of filing patents has
been a major deterrent.
Govt to Part-finance Startups
Spend on Filing for Intl Patents
Cementing A Deal
Final bidders for Lafarge India: Temasek, Advent, Carlyle
8MT:
Current
capacity
`6000 cr
capex lined
up
Globally, co is under severe
pressure to restructure its
business and reduce the
high leverage on its consoli-
dated books
Deal may lead to similar
sized global cos raising
funds locally in growth
markets
Blackstone is in talks with
Sree Jayajyothi Cements
ABG Cements wants to
raise money to fund its ce-
ment operations in Gujarat
Binani Cement is looking
at divesting 40% stake to
nancial investors
Cement sector has wit-
nessed sluggish demand
and margins have shrunk
due to high transport costs
But theres hope of revival
on the back of govts push
to expedite infra projects
Sector Overview
Lafarge: Indian Odyssey
2001
Bought Raymonds
cement biz
2008
Acquired L&Ts concrete
business for $349 million
Entered India in 1999,
acquiring Tata Steels
cement biz
Cement Cos on
Selling Spree
SANDEEP