Megha Engineering Promoter PV Krishna Reddy Plans to Raise Up to INR 15B Debt to Purchase Co. Shares

PV Krishna Reddy, managing director of privately held Megha Engineering & Infrastructures Ltd., a Hyderabad based company primarily engaged in engineering, procurement and construction, is in discussions with Kotak Strategic Situations Fund or KSSF, to raise INR 10 billion to INR 15 billion ($114.2 million-$173.2 million) in debt to purchase company shares from his uncle and company founder–PP Reddy, two sources familiar with the situation said.

The proceeds will be used for making certain “milestone payments” under the share purchase agreement between the two parties, a third source familiar said. Details of the share purchase agreement and milestone payments could not be ascertained immediately.

The terms of the transaction have yet to be finalised as PV Reddy is seeking a pricing in “high teens” as compared to KSSF’s ask for an around 20% yield, one of the sources said. The debt is likely to be raised through private placement of non-convertible debentures, the sources said. However, the third source familiar said that a convertible debt structure is also being contemplated.

Megha Engineering is a multi-sector infrastructure company with presence across sectors such as hydrocarbons, electric buses, defence, telecom, power, and transport, among others, according to the company’s website.

According to a note by domestic credit rating firm India Ratings and Research, dated Nov. 28, 2024, the rating agency expected the Megha Engineering’s revenue to increase to INR 350 billion-370 billion in fiscal year ending March 31, 2025, owing to a likely strong execution of orders during the second half of the fiscal year, backed by its “robust order book and its strong expertise in executing complex, large and key projects for both state and central governments”.

At the end of June 2024, the company’s unexecuted order book stood at INR 2.25 trillion on account of strong order inflows of INR 807 billion during the fiscal year ended March 31, 2024. The majority of its orders received in fiscal year 2024 were from the domestic market with Andhra Pradesh accounting for 23%, followed by Maharashtra at 15%, Telangana at 14%, Karnataka at 12% and others at 24%, the rating note shows.

The company also emerged as the second biggest buyer of electoral bonds according to data released by the Election Commission of India in March 2024, Economic Times published on Mar. 23, 2024 a report by Press Trust of India.

Megha Engineering and Kotak Alternate Asset Managers did not respond to requests for comment as of press time.