PremiumPrivate equity firms Baring PE Asia and Blackstone are in talks with banks to refinance nearly $700 million worth of loans which were availed for leveraged buyouts of Indian businesses, said two people aware of the development
Mumbai: Private equity firms Baring PE Asia and Blackstone are in talks with banks to refinance nearly $700 million worth of loans which were availed for leveraged buyouts of Indian businesses, said two people aware of the development.
While Baring is looking to refinance debt for its 2021 acquisition of healthcare tech services arm of Hinduja Global Solutions Ltd, the business process management unit of Hinduja Group, Blackstone wants to refinance outstanding loans for its 2019 acquisition of packaging firm Essel Propack Ltd, now known as EPL Ltd.
Private equity firms tend to raise debt to finance acquisitions as it helps to improve their overall returns on deals, while allowing them to make larger acquisitions at more competitive valuations. These are commonly known as leveraged buyouts and are very popular in the developed markets. Such buyouts are also becoming increasingly common in India as private equity firms are increasingly looking to buy controlling stakes as well as make bigger bets in the Indian market.
“Baring is in the market to refinance the HGS loans. They are in talks with most of the foreign banks on the Street. They plan to raise $730-740 million in new loans, which will repay the over $500 million existing debt arrangement that they had raised last year at the time of acquiring HGS for over $1 billion," said one of the two people cited above, requesting anonymity as he is not authorized to speak with the media.
“The refinancing deal will also see Baring take home around $200 million, which is likely to be used to repay investors (limited partners) in its funds. The company has shown robust growth since Baring acquired it and hence they are able to do this refinance at such a time when debt markets are still volatile," the person added.
The company had reported a revenue of $400 million in FY21 before its acquisition by Baring.
Meanwhile, rival private equity firm Blackstone is looking at refinancing $170-175 million worth of outstanding loans on its leverage buyout of EPL, which it had acquired for $470 million in 2019, said the second person cited above, also speaking on the condition of anonymity.
Blackstone currently holds a 52% stake in EPL, having previously sold around 23% stake in the company through block deals on the stock market fetching the American PE firm a sum of $252 million.
Baring PE Asia and Blackstone declined to comment on the development.
In 2019, Baring acquired healthcare analytics firm CitiusTech from its founders and General Atlantic at a valuation of around $1 billion.
The same year it acquired AGS Health, a medical revenue cycle management company for $320 million as well as a controlling stake in publicly listed IT services firm NIIT Technologies Ltd for $381 million.
Blackstone’s major acquisitions in India include Aadhar Housing Finance, Essel Propack, Sona BLW Precision Forging and Piramal Glass and Mphasis Ltd.