PE major will make investment by subscribing to compulsorily convertible preference shares.
The Blackstone Group plans to invest Rs 300 crore in GatewayRail Freight Ltd, a subsidiary of Gateway Distriparks Ltd (GDL) and the second largest player in rail freight after Concor. This is Blackstone’s ninth investment in India since August 2006.
The private equity major will make this investment by subscribing to compulsorily convertible preference shares. On conversion, these will entitle it to acquire around 37 per cent stake. The stake, according to the agreement between the two parties, can even go up to 49.9 per cent if certain performance parameters are not met.
Prem Kishan Gupta, chairman and managing director of GatewayRail, said the company “plans to invest the money to develop new terminals, deploy additional trains and road trailers, expand capacity at existing terminals and strengthen last-mile connectivity”.
At present, GatewayRail has two terminals and it plans to start construction for the Faridabad and Navi Mumbai terminals very soon, and operationalise the Faridabad terminal within a year. GatewayRail, according to Gupta, is growing at 50 per cent annually in terms of revenue. GatewayRail operates from terminals at Garhi Harsaru, Gurgaon, near Delhi, from Ludhiana in Punjab, and Navi Mumbai near the Jawaharlal Nehru Port. It operates a fleet of 17 trains and 235 road trailers and provides end-to-end transportation solutions to exporters and importers in the National Capital Region and Punjab, and domestic trade in the northern, western and eastern parts of India. It has also been a leader in dedicated refrigerated container train operations.
Akhil Gupta, Chairman and Managing Director of Blackstone Advisors, said “infrastructure development is one of the key themes for our investments in India”. He added that the logistics sector in India “holds tremendous promise and is slated to experience significant growth”. Gupta believes his company can help GatewayRail, a market leader in rail transportation, “to scale up to the next level”. When asked if he was happy with the money he was paying for the deal, Gupta quipped: “Being a buyer, every valuation is expensive to me.”
GDL, the leader in port-side CFS business, has invested over Rs 600 crore in the rail ICD/transport business during last three years through GatewayRail. Gopinath Pillai, Chairman of GDL, said The Blackstone Group “which has expertise in the sector, will be fully involved in developing the company’s strategy. The investment will also benefit us strategically, as Blackstone has large players in logistics globally”.
Last year, Blackstone had decided to go slow on its investments, given the likely instability in forming a new government at the Centre. Now, with a stable government and India’s growth story intact, it is very “active” and will keep looking for right opportunities.