Motilal Oswal PE, India SME Investments bet on Gujarat tiles maker Simpolo

Motilal Oswal Private Equity, a part of Mumbai-based Motilal Oswal Financial Services Ltd, said Thursday it has led a transaction to invest $66 million (Rs 526 crore) in Gujarat-based Simpolo Group, a premium tiles manufacturer that owns Simpolo Vitrified and Nexion International.

The Capital Quest had first reported the impending transaction, where the PE firm is partnering India SME Investments, in July.

The deal has been struck via Motilal Oswal PE’s fourth fund, which has been on a fundraising mode and increased the target corpus earlier this year as it brought on board International Finance Corporation as a limited partner (LP), or investor.

Simpolo is a company created by Jitendra Aghara and his family members. The company manufactures and markets vitrified tiles under the Simpolo brand.

The funds will be used to expand capacity for tiles and sanitaryware besides improving logistics and customer service. Simpolo’s sanitaryware division is also expanding into the faucets segment as part of its expansion plan.

The Aghara family is bringing under Simpolo Vitrified two other group firms, Simpolo Ceramics and Nexion International.

Simpolo Ceramics was started in 1991. It is engaged in the business of designing, manufacturing, supplying and distributing, through Simpolo Vitrified, all types of sanitaryware and bath fittings, faucets and allied products to builders, architects and homeowners, both in India and overseas.

Nexion is engaged in designing, manufacturing and sale of premium vitrified tiles. It is also engaged in trading of vitrified tiles manufactured by third parties to customers. Its manufacturing facility is in Morbi (Gujarat) and products are sold under the Nexion and Ispira brands. Formerly Simpolo Emil Ceramica Pvt Ltd, Nexion was incorporated in 2014 and is a joint venture between Italy-based Ceramiche Sperenza S.p.A (Emilceramica group) and the Aghara family.

As per the latest deal, the three Simpolo group companies will be brought together and the Italian partner as well as the two PE firms will pick up a stake in the flagship Simpolo Vitrified.

Simpolo has a pan-India presence, with a network of more than 1,100 dealers, and exports to over 50 international markets. The group has combined revenues of around Rs 1,200 crore. The businesses run with low profit margins. With the consolidation and the PE investment, they would be looking to boost the margins and prepare for a public float in the medium term.

Simpolo was previously reportedly looking to raise around Rs 200 crore by diluting a 20-30% stake and was in talks with Lighthouse Funds, ICICI Venture and Bahrain-headquartered Investcorp to raise the capital.

Motilal is betting on a segment that has previously seen PE interest in companies like Cera Sanitaryware and Kajaria Ceramics.

India SME Investments

For India SME Investments, a four-year-old sector-agnostic private equity firm started by former BanyanTree PE executive Mitin Jain, this would be the second addition to its portfolio basket within three months.

It picked up a small stake as part of the anchor book of Venus Pipes & Tubes during its IPO. The fund has previously invested in fashion jewellery brand Kushal’s, value retailer Citykart, fintech KrazyBee, snacks maker Priniti, digital lending platform Smartcoin and another two-wheeler lender LokSuvidha besides Source.One, a polymer trading marketplace.

Motilal Oswal PE

The firm is led by Vishal Tulsyan and Raamdeo Agrawal. It seeks to invest in 10-15 companies in consumer, financial services, life sciences and niche manufacturing sectors.

The firm is targeting Rs 4,500 crore in total capital commitments for the India Business Excellence Fund IV, higher than the Rs 4,000 crore target it had set when it launched the fourth fund in July last year.

It would be investing Rs 200-300 crore in each portfolio company under the strategy.

The PE firm launched its first fund in 2007, raising $115 million. This vehicle invested in 13 companies. The fund made six-fold returns and clocked an internal rate of return of about 27% at the gross level in rupee terms.

The second fund raised $155 million in 2013 and made 11 investments. The third fund raised $320 million in 2018 and is almost fully committed across nine investments.

Cumulatively, Motilal Oswal PE currently manages more than $1 billion across three growth capital funds and five real estate funds.