The Unit Trust of India and other local mutual funds own 5.24% of Indo Tech, as per the firm's latest filing with the Bombay Stock Exchange on September 30. Foreign institutional investors own a combined 12.67%, which includes a 2.98% stake held by Notz Stucki and 2.28% held by the Swiss Finance Corporation Mauritius.
Assuming Prolec-GE acquires the full 20% for which it is making a tender offer, taking its Indo Tech shareholding to 74.35%, its total outlay on the deal will be $73.5 million.
In the year to March 2008, Indo Tech had net sales of Rs1.9 billion on which it earned an Ebitda of Rs568.4 million. The deal is being transacted at an equity value to Ebitda multiple of 8.5 times.
Indo Tech's recently declared results for the quarter to September 2008 show a 39% growth in net profit over the same quarter in 2007 to Rs142 million on sales of Rs654 million. Sales growth over the corresponding 2007 quarter was 27%. Analysts comment favourably on Indo TechÆs ability to expand margins in a difficult operating environment.
The aim of the transaction is to give Prolec-GE, a Mexico-based manufacturer of oil-filled transformers for the North American market, exposure to growing demand for power equipment in India, while simultaneously creating a springboard from which it can expand into other emerging markets. The deal will also provide opportunities for the buyers to diversify their sources of manufacturing via Indo TechÆs manufacturing facilities.
Indo Tech listed on the Bombay Stock Exchange in 2006. Since then it has expanded by opening a new facility, taking its total number of manufacturing facilities in the Indian states of Kerala and Tamil Nadu to four. One of the intentions of the deal is to increase Indo TechÆs export business by injecting new technology û capacity transformers û and supplying them overseas under the Prolec-GE brand.
This is Prolec-GEÆs first investment in India, and GEÆs second investment into a publicly listed company in the country. The traditional GE strategy has been to grow organically via its various joint ventures. Citi advised Prolec-GE and will also be leading the open offer. KPMG advised Indo Tech Transformers.
Under Indian regulations, 20% of Indo TechÆs equity is locked up with the promoters for three years after the IPO. These shares will become available in March next year when the lock-up period ends. The existing management will continue in more of an investor role, and will remain on the board until March, when the tender period expires.
Indo TechÆs shares gained 1.21% to close at Rs287.85 in Mumbai trading yesterday as investors welcomed the chance to exit in the open offer.
The companyÆs share price has been buffeted by bearish markets û at Rs287.85 it is a fraction of its 52-week high in January of Rs791. But it is trading above a 52-week low of Rs170 that it touched in October.