DLI Transaction Update

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).

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Enquiries:

Infrastructure India plc Sonny Lulla	www.iiplc.com Via Novella
Strand Hanson Limited Nominated Adviser Richard Johnson / James Dance	[phone]
Singer Capital Markets Broker James Maxwell - Corporate Finance James Waterlow - Investment Fund Sales	[phone]
Novella Financial PR Tim Robertson / Safia Colebrook	[phone]

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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