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Exclusive: Updater Services in late-stage talks with PE firm for fundraise

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Chennai-based integrated facility management services firm Updater Services Pvt. Ltd (UDS) is in the final stages of talks to raise a fresh round of equity capital, two persons close to the development told VCCircle. 

The fundraise comes two years after the company bought out the entire stake owned by private equity firm ICICI Venture through a special purpose vehicle (SPV) owned by the promoter of the company.

As part of the deal, the promoter had bought the 41.17% stake held in the company by ICICI Venture in December 2014. Hence, UDS is currently fully owned by the promoter group. 

The company has hired Veda Corporate Advisors to raise about Rs 100 crore (around $14.5 million), said one of the persons cited above. He said the firm is raising the entire capital from a single private equity firm and the talks are in the advanced stage.

The firm is raising the funds for expansion and growth, according to the person. It (funding round) could be considered as bringing on board an investor ahead of a public listing. The firm plans to go for an initial public offering (IPO) in three years or so, he said.

When contacted, Om Prakash BR, vice president - finance at Updater Services confirmed the Rs 100 crore funding process and said the company is working with investment banks on a non-exclusive basis. 

A July 2015 ICRA note said the firm has an inclination to pursue inorganic growth plans, if a suitable opportunity arises.

In April last year, the company hired former chief financial officer of AirAsia India, Vijay Gopalan to head the firm and grow the business strategically through diversification and by adding new service lines. However, Gopalan quit UDS within two months of joining the firm, according to his LinkedIn profile.

Incorporated in  1985, the facilities management company manages more than 150 million sq feet of space.

It has more than 500 permanent staff and close to 40,000 employees working at client locations. UDS is primarily engaged in providing both soft (house-keeping, gardening, etc) and hard facility management (electrical and mechanical maintenance, server management, etc) services.

The company reported a profit after tax (PAT) of Rs 25.5 crore on an operating income of Rs 642.5 crore in FY2014-15, against a PAT of Rs 18.4 crore on an operating income of Rs 508.3 crore during FY2013-14.

Its group companies include Avon Solutions and Logistics Pvt. Ltd, Integrated Technical Staffing and Solutions Pvt. Ltd, and Tangy Supplies and Solutions Pvt. Ltd.

Facility management deals
The facility management and related space has seen several deals in the last couple of years.

Several top global PE firms are in the race to buy into facilities management firm BVG to give exit to private equity firm 3i Group Plc. The secondary transaction for 3i’s stake is likely to fetch $100 million, clocking two-and-a-half times return on its five-year-old investment.

CX Partners-backed Security and Intelligence Services (India) Ltd (SIS), which is bound for an IPO, agreed to acquire facility management company Dusters Total Solutions Services Ltd (DTSS). Private equity firm TVS Capital, which owns 51% stake in DTSS, is expected to get around Rs 115 crore ($17.4 million).

Fairfax-controlled Quess Corp (earlier Ikya Group), which is a subsidiary of tour operator Thomas Cook (India) Ltd and had a stellar listing last year, has been growing through acquisitions, diversifying and creating a string of services. It has acquired 10 companies since 2010 and plans more inorganic expansion going forward.

In other deals, Mumbai-based SILA acquired 51% stake in Envocare Pest Control; India Value Fund Advisors (IVFA) and former Godrej Consumer Goods’ executive Arumugham Mahendran jointly acquired ISS Hicare, the second-largest pesticide services company in the country; ValuePro International Pvt. Ltd acquired city-based indoor plants firm Gardenia Ornamental.

All these firms are looking to tap the growth opportunity with the facility management industry projected to grow at 23-24% annually over the next four years.

According to Frost & Sullivan, the industry is expected to grow from Rs 8,414.7 crore in 2015 to around Rs 20,000 crore by 2019.

Facility management is emerging as a strong business in the commercial services sector though it is yet to gain significance in the residential space. It is slowly catching up though, particularly in gated residential communities in urban India.

“The market dynamics is shifting from single service contract model with multiple vendors to an integrated model with a single vendor. An increase in consumables, manpower and management cost has impacted the cost of facilities management services, forcing customers to replace long-term contracts and providing momentum for integrated facilities management (IFM) contracts in India,” according to a note prepared by Quess Corp at the time of its IPO.

Major players in the space in India include Sodexo India On-site Service Solutions Pvt. Ltd, ISS Integrated Services Pvt. Ltd, Compass Group India Support Services Pvt. Ltd and BVG India Ltd.

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