IGI IPO: Why Blackstone is asking investors to pay for acquisition of overseas assets it owns

BCP ASIA II TOPCO is also the promoter of the India arm that is going public.

In its DRHP, the company has told prospective investors that the proposed acquisition of these overseas businesses (Belgium and Netherlands), from the promoter of the company (BCP ASIA II TOPCO), which will bring all the overseas businesses of IGI under the Indian arm, are aimed to create long-term value for the company’s stakeholders by providing the benefits of IGI’s global business to the shareholders. In addition, these will also lead to streamlining the flow of cash from IGI’s global businesses, it added.

“IGI has filed a DRHP with the regulators on 23 August, 2024 with an intention to list in India. We will not be able to offer any further comments,” a spokesperson for Blackstone told Moneycontrol.

The IPO Rationale

A source aware of Blackstone’s IPO plans for IGI told Moneycontrol that while IGI started off as a global company run out of Antwerp, Belgium, in 1975, immediately after the acquisition, Blackstone’s plan was to flip the structure to India.

As part of this flip to India, in August 2023, Blackstone announced that Tehmasp Printer, who was serving as the Managing Director of IGI India will take over the role of the global CEO of IGI.

“This (flip) meant that all the overseas businesses had to be brought under the Indian arm by acquisitions,” the source said.

“They could have done it in two ways. The Indian entity could have acquired those overseas businesses by raising short term debt and then it could have filed for an IPO and used the IPO proceeds to pay off the debt. But this would have meant that the Indian entity would have had to bear the costs of raising the debt, servicing the interest cost, and the acquisition process would have taken its own time which would have delayed the IPO,” the source said.

However, with the current structure of the IPO, Blackstone will be able to achieve the same objectives, within a more compressed timeline, thereby not delaying the IPO and without saddling the company with the costs associated with raising debt to finance the acquisitions, the source added.

“Since they were flipping the company structure to India, they would have done the acquisitions irrespective of the IPO. The IPO allows them to do the same in a more time and cost effective manner, while also being able to tap the robust Indian IPO markets for a better value proposition,” the source added.

Rich rewards

According to the source cited above, Blackstone is eyeing a valuation of around $4 billion for the IGI IPO.

This would mean that Blackstone stands to make very attractive returns on its $550 million acquisition price for IGI that it paid in May 2023.

“IGI is currently generating an Ebitda (earnings before interest, taxes, depreciation and amortisation) of almost $100 million, so the IPO valuation is a multiple of 40 times,” the source said.