GE Capital part exits Titagarh Wagons with modest returns

Kolkata (KOAA): GE Capital has part-exited its almost eight-year-old investment in Kolkata-based railway wagons manufacturer Titagarh Wagons Ltd, generating modest returns in local currency and taking a haircut in dollar terms.

This is the second liquidity move by GE Capital within the last seven months. However, as against the previous activity where it doubled its money by selling stake in Biocon’s research arm Syngene in just two years, it has had a less than spectacular experience with Titagarh.

GE India in 2007 picked up 15% equity in Titagarh Wagons Ltd, marking the entry of group firm GE Equipment Services into the country. Under a strategic tie-up with Titagarh Wagons, GE Equipment Services had preferred access to wagons manufactured by the West Bengal-based company in which agreement, GE will lease the wagons to the Indian Railways and private shippers in India. GE Equipment Services will also become the preferred provider of vendor financing for Titagarh as per the understanding.

With GE’s investment, Titagarh step up the pace of manufacturing wagons. Titagarh, which manufactured 2,232 wagons during 2006-07, raised its annual manufacturing capacity to 3,600-4,000 wagons after the tie-up.

Railway wagon manufacturing capacity in India is limited with the waiting time being around 18 months. Titagarh Wagon Ltd, incorporated in 1997-98, is one of the leading private sector railway wagon manufacturers in India.

It also manufactures Bailey Bridges, heavy earth moving and mining equipment, and steel and SG iron castings of moderate to complex configuration.

During the period, Titagarh and GE also explored a variety of ways to improve rail transport, including incorporating GE’s forthcoming VeriWise RAIL asset management technology in the manufacture of future wagons. VeriWise RAIL enabled railways and shippers to locate specific cars and monitor their condition and the condition of their freight, thereby helping to enhance the visibility, security and productivity of the rail system.

GE is the owner and lessor of more than 200,000 rail wagons and intermodal assets in North America and Europe. “Our domain expertise in rail and other forms of transport allows us to bring a wide range of best practices from our various global platforms to India, including new financing structures, new wagon designs, new forms of fleet management, and other new services. Providing wagon solutions with Titagarh will be our first step toward improving the supply chain infrastructure in India,” said the official during the tie up.

GE Equipment Services, a part of GE India, valued the Kolkata-based Titagarh Wagons Ltd at Rs.524 a share when it bought a 15% equity stake in privately-held Titagarh in mid- July.

GE Equipment Services, a part of GE India, valued the Kolkata-based Titagarh Wagons Ltd at Rs 524 a share when it bought a 15% equity stake in privately-held Titagarh in mid- July. The deal valued the wagon-making company at Rs 966 crore.

When GE India had announced the deal, the price had not been disclosed. Since then, Titagarh Wagons has filed its plans for an initial public offering (IPO). At Rs 524 for each convertible preference share plus a 5.88% stake in the pre-issue equity at Rs 509 a share, GE has invested Rs 132 crore into the company. It is GE Capital International (Mauritius) — also from the GE stable – that has taken an equity exposure in the JP Chowdhary Group company. Titagarh has entered into a separate technical collaboration with GE Equipment Services. GE Capital International (Mauritius) had subscribed to 1,679,390 preference shares paying Rs 524 a share, Titagarh has now disclosed, following a shareholder agreement inked on July 6, 2007. This entailed an investment of Rs 88 crore by the GE arm in Titagarh. Just after this deal, the promoter group sold 864,440 equity shares in the company at a valuation of Rs 509 a share on August 13. While the preference shares already being converted into equity shares after Titagarh received a request for such, the company has now proposed to allot another 20,20,000 shares to GE.