Reliance Infrastructure Limited today announced the acquisition of Pipavav Defence and Offshore Engineering Company Limited, together with sole management control. Reliance Infrastructure, together with its wholly owned subsidiary Reliance Defence Systems Private Limited , has agreed to acquire from the Promoters of Pipavav Defence 13,00,00,000 equity shares representing approx. 18% shareholding in the Company at a price of Rs 63 per Share, aggregating Rs. 819 crore.
Commenting on the acquisition Nikhil Gandhi, the founder promoter and Chairman of Pipavav Defence and SKIL said together they will make a big defence conglomerate.
This is the first big deal after the government opened up defence sector, said Gandhi. Both have a shared vision for infrastructure growth, he added
According to him the deal is likely to be completed within 3-4 months and will be done in line with regulatory framework.
Reliance Infra is committed to play a long-term game in defence, said Gandhi
Below is the transcript of Nikhil Gandhi's interview with CNBC-TV18's Shereen Bhan, Sajeet Manghat and Varinder Bansal.
Shereen: There were all kinds of speculation on who you were talking to, whether it was M&M or Hero and this one has come as a complete surprise – Reliance Infrastructure it is that you have decided to go with, take us through the rationale behind this?
A: Defence is a very complex and very special subject as far as we are concerned. In this country not many people have made large investments in defence. So, you need a partner who is like minded and who also understands this game very clearly and you have to always stay ahead of time.
Like what we built was far ahead of time and we could think about it 6-7 years ago and we found that the Reliance Infrastructure and Anil Ambani group was meeting our thought and our vision and they were fully committed to not only build infrastructure further but also play the long- term game because this could become a game changer.
If you recall that after government of India introducing the "Make in India" policy this is the single largest investment which is being announced. So, the proof of pudding lies in eating. The group has committed a very large resource to make this company Indian multinational in the defence sector.
Shereen: We understand that you were in conversation with both M&M, those talks fell through. We also then were given to understand that you were talking to the promoters of the Hero Group – the Munjal family and it is clear that those talks didn't go far either. Was it issues related to valuation or the role of promoters that has inked this deal in favour of Reliance Infrastructure? Is Reliance Infrastructure offering you both better valuations as well as role for yourself?
A: I am not commenting on any other company because that would not be fair on my part to do so. I want to tell you about the company who we are partnering with. So far as our role is concerned going forward it is going to be significant because we have a domain knowledge in the defence sector, we have been in this for about a decade ago. We realised that a country cannot become a developed country unless its national security and energy security sector is firmly in place and self reliance is achieved.
I think Anil Ambani group has given us that comfort and confidence and they are equally visionaries and their commitment is very deep. So, we think we are lucky and honoured to have a partner like them because this is a long-term game and you need a committed player to get into this sector and succeed in this sector. If you remember that there are many people are interested in this sector there will be many more investments one would see in this sector but whoever comes first is more valuable.
Sajeet: Just wanted to check with you the purpose of getting a strategic partner was equity infusion in the company. However this deal does not see any equity infusion. In fact the promoters are selling roughly 18 percent and there is an open offer coming in. So, where is the equity infusion? Will that be the next step as part of the deal?
A: Yes indeed because Anil Ambani's Group is very heavily committed to ensure that there is required capital available to the company and its operations. Since our company has made significant investment in building India's finest naval defence facilities and one of its kind in the world. I don't need much of capital into the company because most of the infrastructure is very much in place and with the current infrastructure this company can manufacture large and complex assets like destroyers, submarines and aircraft carriers.
The deal structure is perfectly in place. Our competence was more of building the world class infrastructure and their competence is to run them successfully. We also have some global partners and I think together this company can make a huge progress and it is a very good combination as far as we are concerned.
more to come
Reliance Infra stock price
On March 04, 2015, Reliance Infrastructure closed at Rs 474.90, down Rs 19.65, or 3.97 percent. The 52-week high of the share was Rs 820.00 and the 52-week low was Rs 364.00.
The company's trailing 12-month (TTM) EPS was at Rs 60.20 per share as per the quarter ended December 2014. The stock's price-to-earnings (P/E) ratio was 7.89. The latest book value of the company is Rs 809.64 per share. At current value, the price-to-book value of the company is 0.59.
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