HEG Approves Rs 250-Crore Investment By Madhusudan Kela-Backed Singularity, Affiliates

HEG Ltd.'s board of directors approved on Monday an investment of Rs 250 crore from Singularity Growth Opportunities Fund II in Bhilwara Energy Ltd.

At a meeting, the board approved the execution of share subscription and shareholders' agreement between HEG, Singularity, Bhilwara and its existing shareholders in connection with investment, according to an exchange filing.

The amount will be invested by Singularity and its affiliates. The deal will also involve certain other persons that the venture capital fund will identify in keeping with the terms of share subscription and shareholders' agreement in Bhilwara.

This investment will be in consideration for subscription, allotment and issuance of approximately 1.76 crore equity shares of face value Rs 10 each by Bhilwara in accordance with the terms, such that post‐issuance, the investors will hold 9.6% of the paid‐up share capital of Bhilwara. The shareholders' agreement states that Singularity will have the right to nominate one director on Bhilwara's board, the disclosure said.

After the closing of the investment, Singularity will have the option to invest another Rs 250 crore, for which the price of the shares will be determined by the fair market value of the shares on the day that it exercises this option. However, the price of the shares cannot be lower than Rs 142.08 apiece. Even after this transaction, HEG will own 44.30% stake in Bhilwara, the filing added.

The graphite electrode manufacturer's board also approved a proposal to draft a composite scheme of arrangement between HEG, HEG Graphite Ltd. and Bhilwara. This modified scheme follows the Securities and Exchange Board of India's observations on the original plan. The tweaked plan proposes the demerger of HEG's graphite business into HEG Graphite. It also suggests the amalgamation of Bhilwara into HEG.

The move is expected to unlock value of each of the businesses for the shareholders of the demerged company. This will attract "different sets of investors, strategic partners, lenders and other stakeholders having a specific interest in the respective businesses and providing better flexibility in accessing capital".

Segregating different businesses having different risk and return profiles will provide investors with better flexibility to select investments that best suit their investment strategies and risk profile, according to the company.

The restructuring will enable focused growth strategy for each of the businesses for opportunities specific to each business. It will also provide a separate growth path and focussed management for each of the businesses, it added..

The demerger will also result in greater visibility on performance of each of the businesses. While it will enhance operational efficiency, and help the business verticals pursue growth in a focused manner, the move will also help de-risk the businesses from each other.

Shares of HEG closed 1.71% lower at Rs 387.20 apiece on the BSE, compared to a 0.29% decline in the benchmark Sensex.