US-based private equity (PE) firm Apollo Global Management’s decision to invest Rs 2,250 crore in Welspun Corp Ltd and two of its subsidiaries was touted to be one of the largest PE deals in India. However, out of this amount, the companies later decided to junk talks for Rs 675 crore investment.
In June last year, Welspun and Apollo had announced that the latter had agreed to invest Rs 2,250 crore in Welspun’s holding company and the underlying steel (Welspun Maxsteel) and infrastructure (Welspun Infratech) subsidiaries. According to the deal, Apollo paid Rs 1,305 crore for a close to 20 per cent stake in Welspun Corp. Apollo also bought 12.5 per cent in Welspun Maxsteel for Rs 140 crore and agreed to invest Rs 130 crore in the steel business on account of capital expenditures.
Apart from the above Rs 1,575 crore investment, Apollo and Welspun were also in talks for getting Rs 675 crore in Welspun Infratech, totalling the investment to Rs 2,250 crore. However, this investment has been junked.
“At that time, the infrastructure market was in a very different sphere. We have seen a lot of correction in the infrastructure market. Even if Apollo wants to give us money, we don’t want it,” said Akhil Jindal, director of Welspun Corp.
Jindal said the company had realised infrastructure sector in India had lot of pains and challenges and there was a slowdown in the sector.
The infrastructure business of Welspun is split into three companies — Welspun-Leighton, Welspun Projects and Welspun Infratech.
Welspun bought 35 per cent in Leighton Contractors for Rs 470 crore. This company is now known as Welspun-Leighton. It also bought MSK Projects in 2010 and renamed it Welspun Projects. Welspun Infratech is the third infrastructure arm of the group, in which Apollo was looking to pick up a stake for Rs 675 crore.
The Welspun Group is taking a fresh view of the infrastructure business. Jindal said: “Our infrastructure plans are static. We are not growing too much. We are completing our existing projects. As far as infrastructure is concerned, we have four-five projects which we will be completing.”
He said the company was not bidding for each and every project that is being announced, if any. “We are bidding very selectively. It’s a negative IRR (internal rate of return) game and we don’t want to stoop to that. This market is a winner’s curse.”
Apollo has two seats on the board of Welspun Corp as per the investment agreement.