SREI Infra - French Connection

BNP Paribas Buys 50% In SREI Arm For Rs 775 Cr

BNP Paribas, France’s largest bank, will acquire 50% stake in the equipment financing business along with insurance broking (which is being spun off into a separate company) of Kolkata-based SREI Infrastructure Finance for Rs 775 crore.

The deal, the first of its kind in the country’s booming infrastructure sector, will help SREI to unlock shareholder value, Hemant Kanoria, vice chairman and managing director, SREI said. “The market capitalization of the company is around Rs 600 crore. The deal values the equipment financing business of the company at Rs 1,500 crore, two-and-a-half times of its total market capitalisation,” he said.

SREI is into project financing in addition to equipment financing, the main money spinner. It has Rs 5,000 crore of assets under its management.

Both the companies today signed an agreement to this effect at a press conference in the city. Kotak Investment Banking advised SREI on the transaction while Ambit Corporate Finance was BNP Paribas’ advisor.

BNP Paribas Lease will be the investment vehicle for the foreign bank into the company in which SREI will also chip in Rs 25 crore. SREI will get Rs 375 crore for transferring the infrastructure equipment and insurance broking businesses into a separate company.

The stock market gave a thumps-up to the deal. Share prices of SREI today rose 19.97%, the maximum permissible limit in a day, to close at Rs 71.80 on a strong Mumbai market.

SREI director Sunil Kanoria said the capital infusion would help the company to grow its project financing business as well.

The infrastructure equipment finance market stands at around Rs 14,000 crore. It is estimated to grow at a compounded annual rate of 40% to over Rs 31,000 crore in three years as the country needs to improve its inadequate roads, ports and electricity generation.

India plans to spend more than $320 billion in the next five years to build roads, ports and other infrastructure as it aims for an annual growth of 10 percent by 2012 from 9.4 percent in the year ended March 31.

Source : Business Standard