REG - Infrastructure India - DLI Transaction Update

Infrastructure IndiaAnnouncement

06/09/2023 13:30

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RNS Number : 5972L  Infrastructure India plc  06 September 2023

6 September 2023

 

Infrastructure India plc

("IIP" or the "Company" and, together with its subsidiaries, the "Group")

 

DLI Transaction Update

 

Infrastructure India plc, an AIM quoted infrastructure fund investing directly
into assets in India, is pleased to announce the conditional sale of the
Group's interest in 99.99% of Distribution Logistics Infrastructure Private
Limited ("DLI" and, together with its subsidiaries, the "DLI Group") to
Pristine Malwa Logistics Park Private Limited ("Pristine Malwa"). Pristine
Malwa is a wholly owned subsidiary of Pristine Logistics and Infraprojects
Limited ("Pristine" and, along with all Pristine entities, together, the
"Pristine Group").

 

Transaction Summary

 

The DLI Group, along with IIP and Distribution and Logistics Infrastructure
India, Mauritius, IIP's wholly-owned subsidiary ("DLI Mauritius"), have
entered into a conditional share purchase and shareholders' agreement (the
"Agreement") with the Pristine Group and certain subsidiaries for the majority
acquisition of DLI by Pristine Malwa (the "Transaction").  The Pristine Group
provides end-to-end multi cargo logistics solutions, and services including
port handling, road and rail transport, warehousing, shipping, stevedoring,
customs handling, and integrated logistics in India and Nepal.

 

The Transaction comprises a share swap and upfront cash consideration, whereby
DLI Mauritius, which owns a 99.99% interest in DLI, will receive, in
consideration for selling its entire shareholding in DLI, a cash payment of
approximately US$10 million on closing, and up to 33% of Pristine Malwa's
issued share capital (the "Merged Group"). The final equity and cash
consideration payable to DLI Mauritius is subject to customary adjustments
based on the net current assets and indebtedness of DLI on the closing date.
The Agreement includes certain conditions precedent to be satisfied by each of
DLI Mauritius and Pristine Malwa prior to closing of the Transaction,
including consent of DLI India's lenders, certain governmental approvals,
mandatory regulatory and tax filings, and certain limited operational
processes. Pristine Group requires the consent from the investment committee
of their majority shareholder, Global Infrastructure Partners, in order to
proceed with closing of the Transaction. The Transaction is also subject to
consent from the Group's lenders including GGIC, Ltd., Cedar Valley Financial
and IIP Bridge Facility LLC.

 

DLI

 

DLI is a supply chain transportation and container infrastructure company
headquartered in Bangalore and Gurgaon with a material presence in central,
northern and southern India. DLI provides a broad range of logistics services
including rail freight, trucking, handling, customs clearing and bonded
warehousing with terminals located in the strategic locations of Nagpur,
Bangalore, Palwal in the National Capital Region and Chennai. DLI is the
largest asset in the Group's portfolio.  DLI was valued at £176.2 million in
IIP's unaudited interim results for the period ended 30 September 2022,
representing 88% of the Group's portfolio at that date.

 

Pristine Malwa and Sical

 

Pristine Malwa is the parent company and c. 95% shareholder of Sical Logistics
Limited ("Sical"), a company listed on the India's National Stock Exchange and
the BSE (formerly named the Bombay Stock Exchange). Pristine Malwa is also
engaged in developing and managing private freight terminals in India. Sical
provides port handling, road and rail transport, warehousing, shipping,
stevedoring, customs handling, trucking, retail logistics, mining, and
integrated logistics, with expertise in end-to-end bulk commodity logistics
including coal, iron and cement.

 

Further Information on the Transaction

 

Following closing of the Transaction, which is expected to occur during Q4 of
2023, the Group shall become a substantial minority shareholder of Pristine
Malwa, which will be the holding company of Sical and DLI.

 

Following the acquisition of DLI, the Pristine Group will own and control the
Merged Group and have a pan-India footprint, connecting the rail freight
across north, south and eastern India, and would have a presence at all
significant rail transport and logistics hubs in India. The Merged Group would
have the ability to ship both containers and bulk commodities, expanding the
scope of the business.

 

Sical and DLI have significant synergies, complementary locations and
operational efficiencies, backed by the management knowhow and railway
infrastructure of the Pristine Group.

 

Completion of the Transaction would enable the Pristine Group, together with
Sical and DLI, to take advantage of several macro-changes in the logistics
industry, including:

•     A shift towards a multimodal freight system from a road-based one,
in line with India's goal to reduce logistics costs from 14.4% of its GDP to
10%, and the mission of the Indian railway board to ship 3,000 million tonnes
by rail by 2027 (up from 1,418 million tonnes in 2022).

•     Heavy investments in railways by the Indian Government, expanding
India's overburdened rail freight infrastructure and establishing dedicated
freight corridors.

 

The Transaction allows the Company to remain invested in the Indian logistics
sector through its substantial interest in the Merged Group and realise better
value for the Company's shareholders at the time of exit, which is
contemplated to be within 24 to 36 months from the date of closing of the
Transaction. It also allows the Company to retain a significant indirect
interest in DLI, whilst also benefitting from asset diversification through
its significant indirect interest in Sical. In addition, the Board expects
that by DLI being part of a larger group, it will benefit from economies of
scale.

 

Following the closing of the Transaction, DLI Mauritius will appoint a nominee
director to the boards of Pristine Malwa and DLI India. In addition, IIP will
have customary minority protection rights, such as operational inputs relating
to business plans, information parity rights, pre-emptive rights in respect of
future equity issuances, tag-along rights and change of control covenants in
relation to Pristine Malwa and its subsidiaries. Similarly, DLI Mauritius'
shareholding in Pristine Malwa shall be subject to certain contractual and
statutory transfer restrictions, right of first refusal exercisable by
Pristine Group and drag-along rights applicable in limited circumstances. Each
of Pristine Malwa and DLI Mauritius will also provide customary indemnities to
each other in relation to the Transaction.

 

The Board believes that the Transaction presents an exciting prospect for DLI
with clear synergies and a business combination with considerable reach and
scale. Having considered the funding options currently available to the
Company and the immediate funding needs of the Group, the Board believe that
the Transaction is in the best interests of the Company and its shareholders.

 

The Board looks forward to providing shareholders with further updates, as
appropriate, in due course.

 

 

The information contained within this announcement is deemed by the Company to
constitute inside information as stipulated under the Market Abuse Regulation
(EU) No. 596/2014 as it forms part of United Kingdom domestic law by virtue of
the European Union (Withdrawal) Act 2018 (as amended).

 

- Ends -

 

Enquiries:

 Infrastructure India plc                 www.iiplc.com (http://www.iiplc.com/)

 Sonny Lulla                              Via Novella

 Strand Hanson Limited                    +44 (0) 20 7409 3494

 Nominated Adviser

 Richard Johnson / James Dance

 Singer Capital Markets                   +44 (0) 20 7496 3000

 Broker

 James Maxwell - Corporate Finance

 James Waterlow - Investment Fund Sales

 Novella                                  +44 (0) 20 3151 7008

 Financial PR

 Tim Robertson / Safia Colebrook

 

About the Pristine Group:

 

Pristine Group, headquartered in Delhi, is engaged in the business of
providing end-to-end multi-cargo logistics solutions pivoted around rail
terminals and is backed by Global Infrastructure Partners and British
International Investment.

 

The Pristine Group currently operates six Inland Container Depots and Private
Freight Terminals, with warehousing area of approximately 905,000 square feet.
Additional assets include approximately 2,624 domestic standard containers and
395 dwarf containers. Sical operates three container freight stations in
southern India, with capacity to handle more than 1.5 million TEUs (20-foot
equivalent unit cargo containers).

 

The Pristine Group has been expanding its presence in India through
acquisitions, in the course of which it acquired Sical and has now agreed to
acquire DLI.

 

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