MUMBAI: US-based mid-market buyout fund Argand Capital Partners has agreed to buy 100 percent stake in Sigma Electric for $250 million from its existing owners Goldman Sachs Private Equity.
Argand edged past Aion Capital Partners, the other serious contender for the company to make its first transaction in India, said multiple sources aware of the matter. Goldman Sachs Capital Partners, which invested $172 million in taking a 90 per cent stake in 2007, will exit by taking meagre returns as nearly one-third of the gains were washed away, thanks to a sharp fall in the currency.
The terms of the transactions were agreed and a formal announcement is expected in a week’s time, sources with direct knowledge of the matter told ET. Goldman Sachs had mandated Jefferies to find a buyer late last year.
Sigma Electric is a Pune-based engineering and electrical fittings company. Founded by Sajjan Agarwal in 1982, it caters to customers in the North American and European markets through exports from its Indian plants.
About 90 percent of Sigma’s revenue comes from the US market. Sigma has nine factories in Pune and Jaipur with an installed capacity of 260,00 tonnes per annum. The company manufactures and sells metal castings and injection moulded products and accessories used in a variety of industries including commercial, industrial and residential construction, and power transmission. It earns the majority of its revenues from the US.
It has got an 180,000 sq. ft. warehouse/distribution and technical centre near Raleigh, NC, USA, to cater to its large North American customer base. Currently, Sigma employs over 3,000 people, including 350 engineers, and counts ABB, Delphi and General Electric as its main clients.
It clocked $35 million EBITDA in FY16. With an exposure of nearly $2 billion in India, Goldman is one of the active investment managers in the country with exposure in renewable, infrastructure and structured investment vehicles.
Goldman controls 90 per cent of Sigma while the residual 10 per cent is with Agarwal, who sold his company in 2007. Post acquisition, Goldman changed the management and brought in Viren Joshi as the chief executive.
Under Goldman, Sigma also undertook its largest capex programme. When contacted, Goldman Sachs and Sigma Electric spokespersons declined to comment. Mails sent to Argand Capital did not elicit any response till press time.
The transaction will be the first investment of Argand in India and will signal the entry of a fresh set of asset managers into the Indian private equity market.
Investment from a mid-sized firm such as Argand comes at a time when large sovereign and pension funds are making big-ticket investments in India. Earlier this week, Canadian pension fund CDPQ announced a $250 million investment in the asset reconstruction company of Edelweiss.
Goldman’s private equity arm, Goldman Sachs Capital Partners focuses on leveraged buyout and growth capital investments globally. Besides its investment in Sigma, the PE arm also owns a majority stake in ReNew Power, a leading renewable energy company in India, owned by Sumant Sinha.
Since 2011, Goldman Sach’s total equity funding in ReNew Power comes about $320 million.
Eyes on manufacturing
Interestingly, this will be the second large secondary buyout by a private equity fund in the manufacturing sector in recent years.
Earlier this year, KKR sold its portfolio company Alliance Tires to Yokohama Rubber for $1.2 billion after buying the company from Warburg Pincus in 2013 for around $500 million.
Mismatch in valuation expectations, volatile macroeconomic factors, difficulty in fund-raising and exits are seen as the biggest challenges to PE industry in India.
Exits are expected to increase in future while IPO market, macroeconomic parameters and public market sales, and secondary and strategic sales are equally prominent as exit options; most large exits have been strategic or secondary sales, Bain & Co said in a note in May.
“In terms of attracting PE investments, India remains the most attractive market in Asia-Pacific, followed closely by China. India boasts of a strong GDP growth, a vibrant entrepreneurship ecosystem and a positive outlook, making it one of the most attractive of the emerging economies for PE investments,” it added.
