The FINANCIAL — The Tata Opportunities Fund (TOF), the flagship private equity fund advised by Tata Capital, on July 27, announced an investment of Rs335 crore ($55 million) in Tata Project (TPL), an engineering, procurement and construction (EPC) services company of the Tata group. Headquartered in Hyderabad, with Rs3,444 crore ($550 million) in revenue in FY14-15, PBDIT of Rs295 crore ($44 million), and an order book of over Rs16,000 crore ($2.6 billion), Tata Projects is one of India’s fastest growing EPC companies.
TOF has purchased secondary stakes from four Tata companies – Tata Steel, Tata Motors, The Indian Hotels Company and Tata International – which had taken stakes in Tata Projects after the company was formed in 1979. TOF’s investment for a significant minority ownership marks the fund’s first transaction in the infrastructure services sector. The fund seeks to play a supportive role in assisting Tata Projects in expanding its EPC services franchise with existing and new customers across segments and geographies. The fund has been invited to appoint a nominee to the board of the company, according to Tata Sons Ltd.
Tata Projects enjoys leadership positions in the power generation BOP and power transmission segments. It has recently diversified into urban infrastructure and heavy civil construction having secured several key contracts in railways and urban transportation, including dedicated freight corridors and metro rail projects (Navi Mumbai and Delhi DMRC). Tata Projects is a part of the Tata group’s infrastructure cluster, formed to maximise synergies among Tata entities in the sector.
The TOF’s other portfolio commitments include Ginger Hotels (market leader in economy hotels), Tata Sky (India’s premier DTH satellite TV provider, also a JV with 21st Century Fox), Varroc Engineering (market leader in auto-lighting and two-wheel auto parts), Shriram Properties (mid-market housing developer) and TVS Logistics Services (India’s leading third party logistics service provider).
Commenting on TOF’s entry, Prasad Menon, chairman, Tata Projects, said, “Indian infrastructure-focused companies will see significant growth, with the impact of the Government of India’s ‘Make in India’ initiative. Tata Project’s strategic evolution in the last few years has made it a well diversified player with marquee credentials and provides it with the opportunity to become a world class franchise. We are glad to welcome TOF as a strategic partner in continuing this journey.”
Vinayak Deshpande, CEO and MD, Tata Projects, said, “We are sharpening our focus to deliver best-in-class EPC services and enhancing our scale of operations to global levels. We are investing progressively into technology and engineering capabilities and partnering with some of the best global EPC companies to keep Tata Projects at the forefront of the changing global EPC space. We have maintained a strong balance sheet and this partnership bolsters our ability to raise additional financial resources, when required. We look forward to working with TOF in further strengthening Tata Projects and creating value for all stake-holders.”
Padmanabh Sinha, managing partner of TOF’s advisory team in India, said, “The fund and its limited partners are delighted to partner with Tata Projects in its growth journey. The fund has been evaluating the Indian EPC space and is looking at a revival in the sector as it comes off a cyclical low. The fund believes that EPC companies will be early beneficiaries of an increase in capital spending in India. Tata Projects is one of the few EPC companies with low leverage given its ‘pure-play’ services focus and financial discipline, and is well placed to grow profitably. The fund looks forward to working with Tata Sons and other Tata group shareholders of Tata Projects to create a technology enabled global scale EPC services company.”