Reliance Infrastructure has agreed to purchase an 18% stake from the promoters of debt-laden Pipavav Defence and Offshore Engineering (PDOE) -Nikhil and Bhavesh Gandhi -at Rs.63 per share, or a Rs.819 crore.total of The deal marks the Anil Ambani-helmed company's entry into the defence sector, which has emerged as the centrepiece of Prime Minister Narendra Modi's `Make in India' programme. Reliance Infrastructure trumped M&M and the Hero Group, which were also in the running for Pipavav.
Reliance Defence Systems, a subsidiary of Reliance Infrastructure, will also make an open offer to acquire another 26% for Rs.66 per share, Reliance Infra said in a press statement. If the open offer is successful, the Reliance Group will have to fork out Rs.1,263 crore for a 26% stake, taking the total acquisition cost to Rs.2,082 crore.
As per the agreement with the promoters, Reliance will also acquire from them additional equity shares at Rs.63 per share to ensure that Reliance's shareholding is not less than 25.1%, according to the press release.
Anil D Ambani, chairman, Reliance Group, will become the chairman of the company which will be renamed as Reliance Defence Limited.
The acquisition is the first significant consolidation move among Indian business houses that are drawing up plans to enter the sector after the Narendra Modi government allowed foreign companies to own up to 49% in defence equipment manufacturers as part of a strategy to woo investment. Indian business groups such as Mahindra, Reliance Industries, Tatas and the Hero group have shown keen interest in the sector. After the transaction is complete, the existing promoters of Pipavav Defence will continue to retain a minority stake in the company , and will have two non-executive board seats.
JM Financial Institutional Securities is the sole financial advisor and the manager for the open offer.
The Gandhis are known for building large infrastructure projects and selling them off while retaining a minority stake. In early 2000, they built one of India's largest special economic zones on the outskirts of Mumbai jointly with the state development agency and later sold it to Reliance Industries. Pipavav Defence has one of the world's largest Infrastructure facilities -spread over 841 acres of land in the Gulf of Cambay, Gujarat, including 250 acres developed to shipbuilding.The infrastructure is capable of building submarines and aircraft carriers on the back of a technological alliance with Swedish defence company SAAB.
India is one of the largest spenders on defence equipment. According to government estimates the cumulative defence budget, consisting capital and revenue expenditure, has increased 32% between fiscal 2011 and Rs.2 lakh crore. About 70% of Infiscal 2014 to dia's defence requirements are met through imports and the rest through local production by state-owned companies.
Reliance Defence Systems, a subsidiary of Reliance Infrastructure, will also make an open offer to acquire another 26% for Rs.66 per share, Reliance Infra said in a press statement. If the open offer is successful, the Reliance Group will have to fork out Rs.1,263 crore for a 26% stake, taking the total acquisition cost to Rs.2,082 crore.
As per the agreement with the promoters, Reliance will also acquire from them additional equity shares at Rs.63 per share to ensure that Reliance's shareholding is not less than 25.1%, according to the press release.
Anil D Ambani, chairman, Reliance Group, will become the chairman of the company which will be renamed as Reliance Defence Limited.
The acquisition is the first significant consolidation move among Indian business houses that are drawing up plans to enter the sector after the Narendra Modi government allowed foreign companies to own up to 49% in defence equipment manufacturers as part of a strategy to woo investment. Indian business groups such as Mahindra, Reliance Industries, Tatas and the Hero group have shown keen interest in the sector. After the transaction is complete, the existing promoters of Pipavav Defence will continue to retain a minority stake in the company , and will have two non-executive board seats.
JM Financial Institutional Securities is the sole financial advisor and the manager for the open offer.
The Gandhis are known for building large infrastructure projects and selling them off while retaining a minority stake. In early 2000, they built one of India's largest special economic zones on the outskirts of Mumbai jointly with the state development agency and later sold it to Reliance Industries. Pipavav Defence has one of the world's largest Infrastructure facilities -spread over 841 acres of land in the Gulf of Cambay, Gujarat, including 250 acres developed to shipbuilding.The infrastructure is capable of building submarines and aircraft carriers on the back of a technological alliance with Swedish defence company SAAB.
India is one of the largest spenders on defence equipment. According to government estimates the cumulative defence budget, consisting capital and revenue expenditure, has increased 32% between fiscal 2011 and Rs.2 lakh crore. About 70% of Infiscal 2014 to dia's defence requirements are met through imports and the rest through local production by state-owned companies.
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