India: TPG Capital, Blackstone vie for Kirloskar Oil Engines

Blackstone Group LP headquarters stands in New York, U.S., on Friday, April 14, 2017. Photograph: Victor J. Blue/Bloomberg

Global private equity funds Blackstone Group Lp and TPG Capital are in separate discussions to acquire a controlling stake in Kirloskar Oil Engines Ltd, two people aware of the development said.

The deal is expected to value the Pune-based diesel engine maker at $500 million, said the first of the two people, both of whom spoke on condition of anonymity.

Investment bank Ambit Capital is advising Kirloskar to sell the business, the second person said.

Mint had reported in December that the Kirloskar group was in talks to exit its diesel generator set business and seen interest from strategic and private equity investors. The family of Atul Kirloskar and other group companies hold about 60% stake in Kirloskar Oil Engines while Singapore-based private equity firm Nalanda Capital holds about 10%.

The Kirloskar group, founded in 1888 by Laxman Rao Kirloskar, currently clocks over $3.5 billion a year in revenue.

“As a matter of policy, KOEL does not respond to any kind of speculations and rumours,” said a Kirloskar Oil Engines spokesperson.

Blackstone and TPG spokespersons declined to comment. Mails sent to Ambit Capital and Nalanda Capital remained unanswered till press time on Thursday.

Founded in 1946, Kirloskar Oil Engines manufactures and services diesel engines, agricultural pumpsets and generators. The company has manufacturing units in Pune, Kagal and Nashik in Maharashtra, and Rajkot in Gujarat, and caters to the agriculture, power generation, industrial and construction machinery sectors.

In fiscal 2017, Kirloskar Oil Engines’s profit after tax (PAT) was Rs173 crore on net revenue of Rs2,674 crore, against a PAT of Rs165 crore on net revenue of Rs2,464 crore in fiscal 2016.

Revenue for fiscal 2017 grew 8.5% over the previous fiscal, supported by growth across business segments, according to Registrar of Companies data.

Kirloskar Oil Engines, Cummins India, Ashok Leyland and Mahindra Powerol are the leading diesel generator makers in India.

Last June, Kirloskar Oil Engines had acquired a majority stake in La-Gajjar Machineries (LGM), the maker of Varuna and Raindrop brands of electric pumps.

The Kirloskar group is also engaged with the business of automotive castings, air compressors and air conditioning solutions among others.

The Kirloskar group also holds a minority stake in Toyota Kirloskar Motor Pvt. Ltd which manufactures Toyota cars in India.

Powerica Ltd, another diesel generator maker, had received funding from Standard Chartered Private Equity (SCPEL) in 2007. At present, SCPE holds about 12% stake in the company. Blackstone, which has invested about $3.5 billion in India till date, is an active investor in Indian manufacturing sector.

In 2016, Blackstone had made a 3X return from its four-year old investment in International Tractors Ltd (ITL), the owner of the Sonalika brand of farm equipment. The US fund had sold its 17.75% stake to Japan’s Yanmar Co. Ltd for Rs1,700 crore.

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%.

In 2015, Blackstone had exited its investment from auto component maker Agile Electric Sub Assembly Pvt. Ltd.

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.