Blackstone Capital Partners (Singapore) VI, the affiliate of Blackstone Group, has officially announced that the company has signed an agreement with International Tractors Limited (ITL) under which it has acquired 12.5 per cent share of the latter, amounting to Rs. 520 crore or $100 million. ITL happens to be flagship company of Sonalika Group and is counted among the leading truck manufacturers in the industry. The product portfolio of auto maker comprises an array of tractors, right from below 20 bhp of power to more than 90 bhp models.
The venture between the two entities is in the light of past investments made by the private equity firm in the agricultural sector of the Indian industry. Blackstone Group has invested in several projects, including Nuziveedu Seeds and FINO, a micro finance firm, which is engaged in providing benefit to the rural population of the country. Across the globe, the agricultural yields of the country are among the lowest and thus, usage of tractors will bring a significant development in the agricultural productivity of the country.
ITL started its operations in 1995 and has a turnover of $500 million, which enables it to a garner a share of around 10 per cent in Indian tractor market. Besides, the company ships its products to more than 70 countries. Speaking on why Blackstone acquired stake in ITL, the Senior Managing Director and Chairman of Blackstone India, Akhil Gupta quoted, “We believe in fundamentals, farm incomes are rising, minimum support prices are going up and with the shortage of labour, there is a need for modernisation. We expect the tractor market to grow by 10% CAGR over the next five years.”
Reportedly, Blackstone has remained an aggressive investor in the country and has acquired significant share in AllCargo, Gokaldas Exports and CMS Info Systems, among others. He further said, “Blackstone has identified rural and agro-based companies as a key area of growth, and the investment in International Tractors is a step in that direction.”
ITL was together founded by LD Mittal, the Chairman of the company, AS Mittal, the Vice Chairman and Deepak Mittal, the Managing Director of ITL. Headquarter of the auto maker is situated in Delhi, while its exclusive production facility is based in Hoshiarpur, Punjab. On the new development, the Chairman of the company said, “In addition to helping us scale up our operations, this deal will provide us access to Blackstone's global best practices.”
In the last six months, the overall growth rate of the industry was not so favourable, meanwhile ITL reported a growth of 17 per cent by delivering around 25,000 vehicles in the country, which further increased its market share by 1.5 per cent. Before the end of November 2012, the auto company also plans to foray in the automotive markets of UK, Germany and France. Two years down the line, the company is expecting a market share of 15 per cent, which will turn out to be much lucrative for the company; around $130 million of profits. Speaking on the global presence of the company, its Vice Chairman said, “Blackstone is a globally renowned company. With their astute management support and global know-how, we would aim at faster growth in the future. This fiscal we are likely to close sales at around 60,000 units. Within the next couple of years, we intend to sell 1,00,000 units.”
