Portfolio company
Nitrex Chemicals |  |
|---|
Company website | www.nitrexchemicals.com |
Business sector | Industrials |
Country of operation | India |
Market | South Asia |
Investment status | Current portfolio |
Investment type | Buyout capital |
Date of original investment | 2004 |
Office | Mumbai, India |
Background
The creation of Nitrex, the former nitrocellulose manufacturing and trading division of ICI India, by Actis and the management team was a landmark deal in the Indian private equity market.The management buyout (MBO) of Nitrex is among India's first ever MBO's, and follows Actis's completion in 2003 of India's first private equity backed privatisation, confirming Actis's place as one of the leading private equity firms in India.
ICI had been operating its nitrocellulose manufacturing facility profitably for many years, had built a dominant position in the domestic market and initiated a presence in international markets. However, due to its global strategy of divesting its industrial chemicals activities the business became non-core and ICI India was seeking a buyer for the business as a going concern.
Their needs
ICI India was looking for a buyer who would not only ensure the continuity of the business in line with their own values but who would also take an employee-friendly approach to the buyout.The incumbent management team of the nitrocellulose division had extensive experience and a deep understanding of the business, and a strong vision for expanding the business internationally.
Changes in the market landscape offered up opportunities to develop the business through organic growth and acquisitions and the management team wanted a backer who would provide more than just money. They needed a backer with unrivalled business expansion experience and the international business exposure to help them deliver on their vision.
Our solution
Actis identified strong synergies between the vision of the management team and the value that we could create for the business.Our experience of working with corporate vendors also enabled us to navigate effectively the often sensitive process of spinning out a business by building strong relationships with both the vendor and the management team.
In March 2004 the purchase of the nitrocellulose division by Actis and the management team was completed for an upfront payment of US$13.8million and Nitrex was created.
Actis's added value
Actis's experience of negotiating and executing management buyouts from corporate vendors enabled us to complete the deal in just 75 days.This enabled the management team to communicate positively and maintain strong relations with the staff of over 100 employees who have historically played a key role in improving production processes within the business. The swift execution of the deal also enabled the management team to manage effective communications with key customers and further strengthen their relationships through what can often be unsettling times for all stakeholders in the business.
Since investing, Actis has provided critical support for Nitrex's expansion options, acquisition plans and divestment. Actis sourced and led the search for acquisition opportunities by identifying suitable targets and helping management negotiate debt packages to complete the acquisition successfully. In addition, Actis supported the management in their expansion plans by providing strategic support on the plans to add a green-field plant. On the corporate governance side, Actis helped build a solid board by identifying suitable Non Executive Directors with strong industry experience and also assisted in improving the internal systems and health and safety practices, including pollution controls by bringing in Actis's internal ESG expert to assess and provide guidance.