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Infrastructure India plc Announces Conditional Sale of DLI Group to Pristine Malwa

Published: September 11, 2023
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Infrastructure India plc, an AIM quoted infrastructure fund investing directly into assets in India, is pleased to announce the conditional sale of the Groups interest in 99.99% of Distribution Logistics Infrastructure Private Limited to Pristine Malwa Logistics Park Private Limited. Pristine Malwa is a wholly owned subsidiary of Pristine Logistics and Infraprojects Limited.

The DLI Group, along with IIP and Distribution and Logistics Infrastructure India, Mauritius, IIPs wholly-owned subsidiary, have entered into a conditional share purchase and shareholders agreement with the Pristine Group and certain subsidiaries for the majority acquisition of DLI by Pristine Malwa. The Pristine Group provides end-to-end multi cargo logistics solutions, and services including port handling, road and rail transport, warehousing, shipping, stevedoring, customs handling, and integrated logistics in India and Nepal.

The Transaction comprises a share swap and upfront cash consideration, whereby DLI Mauritius, which owns a 99.99% interest in DLI, will receive, in consideration for selling its entire shareholding in DLI, a cash payment of approximately US$10 million on closing, and up to 33% of Pristine Malwas issued share capital. The final equity and cash consideration payable to DLI Mauritius is subject to customary adjustments based on the net current assets and indebtedness of DLI on the closing date.

The Agreement includes certain conditions precedent to be satisfied by each of DLI Mauritius and Pristine Malwa prior to closing of the Transaction, including consent of DLI Indias lenders, certain governmental approvals, mandatory regulatory and tax filings, and certain limited operational processes. Pristine Group requires the consent from the investment committee of their majority shareholder, Global Infrastructure Partners, in order to proceed with closing of the Transaction. The Transaction is also subject to consent from the Groups lenders including GGIC, Ltd., Cedar Valley Financial and IIP Bridge Facility LLC.

DLI is a supply chain transportation and container infrastructure company headquartered in Bangalore and Gurgaon with a material presence in central, northern and southern India. DLI provides a broad range of logistics services including rail freight, trucking, handling, customs clearing, and bonded warehousing with terminals located in the strategic locations of Nagpur, Bangalore, Palwal in the National Capital Region, and Chennai.

Pristine Malwa is the parent company and 95% shareholder of Sical Logistics Limited, a company listed on the Indias National Stock Exchange and the BSE. Pristine Malwa is also engaged in developing and managing private freight terminals in India. Sical provides port handling, road and rail transport, warehousing, shipping, stevedoring, customs handling, trucking, retail logistics, mining, and integrated logistics, with expertise in end-to-end bulk commodity logistics including coal, iron and cement.

Following closing of the Transaction, which is expected to occur during Q4 of 2023, the Group shall become a substantial minority shareholder of Pristine Malwa, which will be the holding company of Sical and DLI.

Following the acquisition of DLI, the Pristine Group will own and control the Merged Group and have a pan-India footprint, connecting the rail freight across north, south and eastern India, and would have a presence at all significant rail transport and logistics hubs in India. The Merged Group would have the ability to ship both containers and bulk commodities, expanding the scope of the business.

Sical and DLI have significant synergies, complementary locations and operational efficiencies, backed by the management knowhow and railway infrastructure of the Pristine Group.

Completion of the Transaction would enable the Pristine Group, together with Sical and DLI, to take advantage of several macro-changes in the logistics industry, including:

A shift towards a multimodal freight system from a road-based one, in line with Indias goal to reduce logistics costs from 14.4% of its GDP to 10%, and the mission of the Indian railway board to ship 3,000 million tonnes by rail by 2027 (up from 1,418 million tonnes in 2022).

Heavy investments in railways by the Indian Government, expanding Indias overburdened rail freight infrastructure and establishing dedicated freight corridors.

The Transaction allows the Company to remain invested in the Indian logistics sector through its substantial interest in the Merged Group and realise better value for the Companys shareholders at the time of exit, which is contemplated to be within 24 to 36 months from the date of closing of the Transaction. It also allows the Company to retain a significant indirect interest in DLI, whilst also benefitting from asset diversification through its significant indirect interest in Sical. In addition, the Board expects that by DLI being part of a larger group, it will benefit from economies of scale.

The Board believes that the Transaction presents an exciting prospect for DLI with clear synergies and a business combination with considerable reach and scale.

About the Pristine Group

Pristine Group, headquartered in Delhi, is engaged in the business of providing end-to-end multi-cargo logistics solutions pivoted around rail terminals and is backed by Global Infrastructure Partners and British International Investment.

The Pristine Group currently operates six Inland Container Depots and Private Freight Terminals, with warehousing area of approximately 905,000 square feet. Additional assets include approximately 2,624 domestic standard containers and 395 dwarf containers. Sical operates three container freight stations in southern India, with capacity to handle more than 1.5 million TEUs (20-foot equivalent unit cargo containers).

The Pristine Group has been expanding its presence in India through acquisitions, in the course of which it acquired Sical and has now agreed to acquire DLI.

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