Mumbai: Essel Infraprojects Ltd is in advanced talks to buy a controlling stake in Hindustan Dorr-Oliver (HDO), a publicly traded unit of debt-laden infra developer IVRCL Ltd, two people with direct knowledge of the matter said.
“The talks are at a final stage and are being led by the creditors of IVRCL who are trying to sell the company’s assets through a piecemeal approach to recover their dues while simultaneously looking for a new owner,” one of the two people said on condition of anonymity.
Lenders to IVCRL had decided in December last year to convert their debt in the company to equity under the strategic debt restructuring (SDR) mechanism.
“Lenders initially tried to sell equity at the company (IVRCL) level but were not successful,” said the second person. “Now, they are looking to sell its subsidiaries and reduce the debt on their books.”
A spokesperson for Essel Infraprojects declined to comment. Emails sent to IVRCL and Hindustan Dorr-Oliver remained unanswered till the time of going to press.
On 24 February, IVRCL told stock exchanges that State Bank of India, on behalf of the lenders, has informed the company that lenders have approved the SDR conversion package. Lenders converted part of the firm’s debt into equity at a price of Rs8.765 per share. After the conversion, the lenders collectively hold 51% or more of the total share capital of the company.
HDO is 55% owned by IVRCL. Foreign institutional investors and other investors own the rest.
As on March, HDO had a consolidated debt of Rs392.75 crore. For FY16, the company clocked annual revenue of Rs209.30 crore, down from Rs363.98 crore the year before. The company has been reporting losses for the past five years, including a Rs163.26 crore loss in FY16.
HDO is one of the prominent engineering, procurement, and construction players and has been involved in major industrial projects in the areas of mining and minerals, water and wastewater, fertilizers and chemicals and pulp and paper.
The company has a plant near Ahmedabad to manufacture pressure vessels, heat exchangers, storage tanks and other proprietary solid-liquid separation equipment. The company employs about 1,300 people.
Essel Group’s interest in IVRCL has been reported earlier. In September 2012, Business Standard reported that Essel Group had acquired 10.19% in IVRCL and was keen to increase its stake in company. This had led to speculation that this acquisition was a prelude to a possible takeover of IVRCL. That was denied by Essel Group.
In an April 2012 interview to Business Today, Essel Group chairman Subhash Chandra, however, said that he was keen to acquire IVRCL to strengthen Essel’s infrastructure business but found the price quoted by IVRCL’s bankers too high.