MUMBAI: American engineering giantEmerson Group will purchase Pune-based unlisted Virgo Valves and Controls, which makes valves for oil drilling, for about $450 million, said a person with direct knowledge of the development, signaling the continued interest by overseas strategic investors in Indian companies.
"Virgo's leadership in the engineered, on-off valve market is a great strategic fit within our business and strongly complements our Fisher control valve business," said Steve Sonnenberg, Emerson's executive vice-president and head, Emerson Process Management segment.
The deal will provide an exit option to Virgo's two founders Mahesh Desai andBalasubramanian after more than two decades along with their private equity investor Tano Capital, while the new acquisition will complement the $24-billion Emerson's Fisher control valve business used in various engineering verticals.
Tano Capital had picked up a stake of 10% stake in Virgo Engineers for $13 million in 2006 valuing the company at $130 million.
The company had attempted to list on the Indian stock exchanges in 2008 and 2010 but failed as it didn't receive what it considered a fair value. Desai and his partner Balasubramanian, both former engineers from Larsen & Toubro, built the company up from scratch and now own four factories in India, the US, Italy and Germany with 900 employees. It supplies products to oil and gas, power and mining companies in 72 countries. Desai owns 32% stake, while 28% is with Balasubramanian. The rest is held by various investors.
"The alliance with Emerson and, in particular, the Fisher line of products, is a continuation of our growth as a global brand," said Desai, co-founder and chairman of Virgo. Of the company's $250 million revenue, 80% comes from overseas. Bankers and consultants expect more strategic inbound deals for Indian companies that make niche products.
"The valuation at which this deal is being done is in line with what any high-quality growth business would get globally. We continue to see a lot of strategic interest in the industrials space from European, Asian and US investors," said Preet Mohan Singh, executive director and head, industrials, at domestic investment bank Avendus Capital.
Inbound deals to India doubled in the first half of calendar year 2013 from a year ago. Between January and June 2012, there were 76 inbound deals worth $2.97 billion as against 65 deals worth $4.11 billion this year, according to data provided by Grant Thornton India, a global consultancy service.
Some consultants said the rupee'sdepreciation has heightened the interest of overseas investors. The rupee has depreciated nearly 22% between January and August, but has recovered 9% since then. "India's attractiveness is always compared to other destinations for such global strategic players and on a medium- to long-term perspective, India continues to be attractive. With the rupee depreciating, it has helped a lot of inbound buyers to firm up their decisions," said an investment banker.