Sanghvi brother sells stake to private equity
24 July 2006Anil Kumar Sanghvi has departed from India’s Sanghvi Movers Limited (SML) and sold his 23% stake of the business to three private equity firms for INR1.32bn ($28m). He was formerly joint managing director, with his brother Chandrakant, of one of India’s largest crane hire companies with more than 160 cranes.
The sale will reduce the Sanghvi family’s stake in the business from 70% to 47%. In an announcement to the Bombay Stock Exchange, SML named the new investors as Olympus India Holdings Ltd, Olympus Cranes Holdings Ltd, and Clearwater Capital Partners Investments Ltd.
Sanghvi Movers Limited, founded in 1989, has built its business buying second-hand cranes from the international market. The company has invested on the basis of India’s booming construction industry, buying 52 new cranes in 2005. A report by Karvy Stockbroking in December 2005 said that SML was planning to increase its fleet to 205 cranes this year, by buying 35 new cranes, a handful of which will be in the 400t-600t capacity range.
SML reported sales up from INR754m ($16m) in March 2005 to INR1490m ($31m) in March 2006, and net profits up from INR136m ($2.9m) to INR322m ($6m) over the same period. It has been building a small, but growing, sideline in installing wind turbines; this area is India’s most successful source of renewables, and looks likely to continue to grow.
The Karvy Stockbroking report highlighted that SML’s expansion has been funded by a debt mix ratio of 75:25. In 2005, debt stood at 1.8 times equity; Karvy estimated this would peak at 2.8 times equity in FY2006. Many analysts have spoken positively about this debt ratio, pointing out that India’s demand for cranes, and SML’s many long-term (up to 24-month) contracts put it in a strong position to benefit from the increase in fleet size that this borrowing allows.
In early 2006, SML held board meetings looking at increasing the company’s authorised share capital. A special company meeting was held in March 2006 to consider raising funds up to a maximum of $35m, and to increase the proportion of shares that could be held in the company by foreign institutional investors to 35%. Previously, foreign investors had been limited to a 24% stake.
An SML announcement on Anil Sanghvi’s departure said that Olympus India, Olympus Cranes and Clearwater Capital had bought sizable stakes in the company (coming close to the full 23% held by Anil Sanghvi). Frederick Long has been appointed as an additional director of the company, and Gaurav Malik has been appointed as his alternate director.
Long is the founder of Olympus Capital Holdings Asia, which he established in 1997 to invest in firms across Asia. In that time it has invested more than $750m in more than 20 firms in the region. The firm describes itself as an “active sponsor with special expertise in strategic investments with Asian and western companies”. It has offices in Hong Kong, New York, Seoul, and Tokyo. Clearwater Capital manages around $500m spread over three funds, dedicated to Asian fixed income bonds and special situations.
