IBM Daksh, Texas Pac infusion to fund KLG Power capex plans

IBM Daksh plans to invest Rs 12 crore in KLG Systel's subsidiary, KLG Power. It will pick up 1.19% stake in KLG Power at Rs 608.90 per share. Today's deal values KLG Power close to Rs 1,000 crore. KLG Systel holds 99% in KLG Power which is an unlisted entity.

Conforming this development, Kumud Goel , MD, KLG Systel, said the power subsidiary would have two investors. "One is IBM Daksh and the other is Texas Pacific Group who is going to invest USD 50 million."

Goel said the company plans to have a pan-Asia presence. "We are expanding in the utility sector in India, and now have an office in Singapore. We are going to expand in the whole of Asia, including China, because there are few companies who are doing software for the power sector. We would be using it for international expansion in US also."

Excerpts from CNBC-TV18's exclusive interview with Kumud Goel:

Q: We believe IBM Daksh has picked up 1.19% stake at Rs 12 crore. Would you internally value your company close to Rs 1,000 crore?

A: I am not an expert on valuations. We have developed certain software and hardware technologies like Vidushi, SG61, and Connect Gaia, which has an international reach. This is a new breed of technology for the utilities sector. Investors have valued it that much. So, I would tend to agree with that.

Q: Would you look for more such investors in your power subsidiary?

A: We will have only two investors in the power subsidiary. One is IBM Daksh and the other is Texas Pacific Group who is going to invest USD 50 million.

Q: Has that money already come in?

A: We are going through the transfer of assets, so it should happen in about a month.

Q: Will you put both this pools of money to use in the power company?

A: We are expanding in the utility sector in India, and now have an office in Singapore. We are going to expand in the whole of Asia, including China, because there are few companies who are doing software for the power sector. We would be using it for international expansion in US also.

Q: What is the visibility you see in terms of orders and sales?

A: Right now, we have a visibility of Rs 200 crore in KLG Systel's power division, but the market is very huge. In fact, APDRP II, or Accelerated Power Development and Reform Programme, which will get announced very soon. The investment in software and automation sector for the power sector would be in the range of USD 1 billion in the next 2-3 years. So, it is going to be a very big market.

Q: There are no signs of any slowdown in orders at all considering that there are fiscal constraints on the government?

A: The government has to implement at least 75,000 mw in the 12^th Plan. We have losses of 50,000 mw, which are to be curbed. A 50,000-mw loss means about Rs 20,000 crore in losses. The government is obviously not going to slowdown investment in the power sector. In fact, they will have to raise it to increase GDP.