Toshiba partners with IVFA-owned UEM Group

"We were not looking for strategic investors, because we think we are still in the middle of our value creation," Vishal Nevatia, IVFA's managing partner, explains. "A project takes 12-24 months to execute so we have a project pipeline which will take the business to 2x in two years' time. It will take till then to complete what we would like to do with the company."

Toshiba took a 26% stake in fresh equity instead, which has diluted IVFA's holding down to 51% but leaves the GP to run the business. The PE firm is reported to have made a paper gain of 2.7x.

UEM was founded in 1973 to provide turnkey services in water and wastewater collection, treatment and disposal facilities. IVFA has been working with the company since 2009, when its founder, Kris Kshetry, sought help on project execution to cope with the rate at which the company was growing.

The GP bought a 70% stake for around INR1.2 billion ($19.59 million) and the company has posted compound annual growth of over 50% in the five years since. Annual revenues are around $70 million.

"The whole focus on water and waste water management in India has increased significantly in the last 5-10 years," Nevatia says. "Not only do regulations require you to process waste water, but more importantly it's just the availability of water - per head freshwater in India is close to sub-Saharan levels. So if you are setting up a large project in India, availability of fresh water is a challenge."

Toshiba pegs the global water market at over $500 billion and growing 6-7% annually. Demand for water is projected to overshoot supply by 40% in the next 20 years, with half of the world's population living under conditions of "water stress" by 2030.

UEM is headquartered in Noida but has operated projects in over 30 countries in sectors such as oil and gas, power, breweries and tanneries. Two-third of its business is domestic and the company is focused on complex, higher-margin solutions, which are less competitive. Its technical expertise makes it one of the few companies with expertise in areas such as capabilities such as zero liquid discharge systems, where water is recycled completely, without a drop being wasted.

Toshiba will join the UEM board, offering its expertise and global access, while learning from UEM's experience in delivering turn-key projects around the world. Other divisions of Toshiba in India, such as power plants, need water treatment solutions and UEM will get access to those.

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• Topics
• South Asia
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• Expansion
• India
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• India Value Fund Advisors