Citi fund invests $15 m in Spentex

Citigroup Venture Capital International (CVC), the private equity arm of Citigroup, has invested $15 million (Rs 69.78 crore) in Spentex Netherlands BV, a 100 per cent subsidiary of Spentex Industries (SIL).

The fund will be used by SIL to part-finance its recent acquisition of the Uzbekistan-based Tashkent-To'yetpa Tekstil LLC (TTTL).

Spentex claims that this is the first time that any private equity firm or foreign institutional invester has invested in a foreign subsidiary of an Indian company.

"CVC is investing the money in the form of preferential equity, which will be converted into equity at par within two years from the date of allotment after which Citigroup will get almost 40 per cent stake in Spentex Netherlands BV. Until then, SIL will continue to hold 100 stake in its Netherlands venture," Spentex Industries Managing Director Mukund Choudhary said, adding the transaction was closed last week.

The acquisition of TTTL at $81 million will have to be paid over four years with an upfront payment of $20 million. CVC's investment will be used to make part-finance the upfront payment, while SIL will pump in $12 million to fund the rest of the payment as well as other expenses in Uzbekistan.

"We routed the acquisition of Tashkent-To'yetpa Tekstil through our Netherlands arm as it makes better sense commercially. Uzbekistan and the Netherlands have a double taxation avoidance treaty in place, which works out better for us," he said.

The latest infusion of fund by CVC in Spentex will not affect its holding in the parent company in India, in which the Mauritius-based venture capital fund already has 30 per cent stake, Choudhary said.