India: Blackstone to sell stake in Sonalika tractors for $250m

Photo: Bloomberg

Blackstone Group will sell its 17.75% stake in International Tractors Ltd (ITL), the owner of the Sonalika brand of farm equipment, to Japan’s Yanmar Co. Ltd for Rs1,700 crore, according to two people aware of the development.

Blackstone, which had invested about $100 million (Rs520 crore then) for a 12.5% stake in the tractor maker in 2012, subsequently raised its stake to 17.75%. Yanmar already owns 12.5% in ITL.

The founders led by chairman Lachhman Das Mittal own the remaining 70% in ITL.

The company was valued at about Rs4,200 crore when Blackstone Capital Partners (Singapore) VI, an affiliate of Blackstone Group, acquired 12.5% in October 2012. The proposed deal will value ITL at Rs9,500 crore, one of the two people said on condition of anonymity.

Yanmar, the second-largest tractor maker in Japan, acquired the ITL stake in 2005 for Rs200 crore.

ITL is India’s third-largest tractor maker after Mahindra & Mahindra Ltd (M&M) and Tractors and Farm Equipment Ltd (TAFE).

ITL’s tractor plant in Hoshiarpur, Punjab, has a capacity to produce approximately 200,000 tractors a year. M&M is the market leader with about 38% market share while Sonalika holds about 10%.

Calls and text messages sent to A.S. Mittal, vice-chairman of ITL, remained unanswered. An email sent to the company spokesperson also did not elicit a response. Spokespersons for Blackstone and Yanmar did not respond to emails seeking comment on Thursday.

Privately held ITL was planning to sell shares to the public to provide an exit to Blackstone, Mint reported in December last year.

The company initiated discussions to hire bankers for an initial share sale, the report said. The tractor maker had sales close to Rs4,000 crore in 2014-15, reported Mint.

Credit rating agency ICRA expects a growth of 9-10% in tractor sales (domestic sales and exports) in FY2017.

“The tractor industry witnessed a spike in domestic volumes since April 2016 with farm sentiments uplifted by reasonable rabi crop production, healthy rainfall precipitation as well as government support programmes,” a December 2016 report from ICRA said.

“While the improved farm sentiments could have driven a healthy double-digit growth in volumes during the current fiscal, the recent demonetization by the government of India would adversely impact sales volumes over the near term,” the report added.

In the past couple of years, Blackstone has made several exits from its India investments. In 2015, the fund exited two of its private investments—Agile Electric Sub Assembly Pvt. Ltd and CMS Info Systems Ltd. It also made a partial exit from fragrance maker SH Kelkar Ltd through its initial public offer (IPO) in October 2015. Blackstone, which established its office in India in August 2005, has since committed more than $5 billion in the country.

Also Read: India: Sonalika Tractors parent to file up to $300m IPO, Blackstone may sell stake

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This article was first published on Livemint.com

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Singapore Reporter/s

In Singapore, we are looking to double our reporting team by this year-end to comprehensively cover the fast-moving world of funded startups and VC, PE & M&A deals. We want reporters who can tell our readers what is really happening in these sectors and why it matters to markets, companies and consumers. The ability to write precisely and urgently is crucial for these roles. Ideal candidates must have to ability to work in a collaborative, dynamic, and fast-changing environment. We want our new hires to be digitally savvy and ready to experiment with new forms of storytelling. Most importantly, we are looking for hard-hitting reporters who work well in a team. Collaboration and collegiality are a must.

Following vacancies can be applied for (only in Singapore).

Following vacancies can be applied for (only in Singapore).   

  • A reporter to track companies/startups that have raised private capital, and have the potential to become unicorns. SEA currently has over 40 companies with a valuation of over $100 million and under $1 billion.
  • A reporter who can get behind the scenes and reveal how funding rounds are put together, or why they’ve failed to materialise. She/he in this role will largely focus on long-format stories. 
  • A journalist to track special situations funds, distressed debt and private credit (from the PE angle) across Asia.