Details of the Transaction (Including unique traits, if any)

Deal: Arrangement of 26% Equity (INR 341.5 Crore) from Private Equity investors for RFCL

Description: RFCL is setting up Gas Based Urea Manufacturing Plant at Ramagundam, in the state of Telangana, India, with a capacity of 3,850 Ton per Day Urea Unit. The project cost of Rs. 5,254.28 Crore was funded at a Debt-Equity Ratio of 75:25 i.e. Debt of Rs. 3,940.71 Crore and Equity of Rs. 1,313.57 Crore. The entire debt of Rs 3,940.71 Crore has been tied up through Rupee Term Loan (RTL) with a consortium of six Indian Banks in 2016 by SBICAPS. The Company was required to tie up the Equity Contribution of Rs 1313.57 Crore. NFL, EIL, and FCIL along with Govt of Telangana had committed 74% of the required equity. Balance 26 % equity stake has been tied-up through equity infusion by GAIL India Ltd and HTAS Consortium (HT RAMAGUNDAM A/S, IFU and DAF) to take 14.3% and 11.7% equity stake in the company respectively for which SBICAPS was the sole arranger. The equity deal was concluded on 18th August 2018 with the signing of Share Subscription Cum Shareholders Agreement.

SBICAPS role

SBICAPS has been engaged for Financial services encompassing wide range of activities viz Equity Term Sheet, Development of Financial model, Risk analysis and Mitigation Strategies in the Project, preparation of Financial Information Memorandum, Shortlisting and approaching investors with the investment proposal, Investor presentations and providing assistance in Share Subscription Cum Share Holders Agreement and advising the company on closing actions, identifying/ addressing the various risks as well as the shortlisting of potential investors and presentations to the management committees of the Investors.

Key Learnings

1. Arranging Equity for a regulated business:
   Arranging Project Equity for a Urea Project in India, which is entirely regulated by the Government, was the key challenge. Due to the regulated nature of the business which only offers fixed regulated returns it was really challenging to find a strategic/financial partner for the Project.
2. Finding the strategic fit for the Project
   The Project does not require only a financial investor but also requires a strategic investor which would also aid in the Project operations. Therefore to find such strategic fit was a major challenge. SBICAPS convinced the major technology licensor M/s. Halder Topsoe A/S, Denmark along with financial investor IFU and DAF from Denmark. SBICAPS also managed to bring in GAIL (India) Limited with the strategic fit of supplying the feedstock, Natural Gas, for the Project.
3. Board Seat
   As per the articles of the Company, Board seat is only available at a minimum equity stake of 11%. M/s. Halder Topsoe A/S, Denmark and IFU and DAF individually were not inclined to take 11% equity, however, they desired board seat. In order to provide an amicable arrangement, SBICAPS managed to convince the three investors from Denmark to form a consortium as regards the rights to Board seat is concerned so that cumulatively, their equity stake meets the board seat threshold of 11% equity.