Hyderabad: US-based private equity giant Blackstone Group will invest $150 million in Hyderabad-based construction group Nagarjuna Construction Company Limited, ranked as the third largest construction firm in India.

Blackstone''s decision to invest in Nagarjuna Construction is based on expectations of government and private spending in infrastructure projects in India rising to keep pace with demands of a booming economy.The Planning Commissionhas projected
investments in infrastructure to top $470 billion in the next five years.

This is the fourth investment in India this year by the New York-based Blackstone. Earlier this month, it reached an agreement to pay up to $165-million to acquire a majority stake in Gokaldas Exports Ltd, India''s leading garment exporter.

Nagarjuna Construction will make a fresh issue of shares and convertible warrants in favour of Blackstone GPV Capital Partners Mauritius V-A Ltd, Blackstone FP Capital Partners (Mauritius) V FII Ltd, Blackstone GPV Capital Partners (Mauritius) V-H Ltd.

Blackstone funds will invest equity capital in the Company in two tranches. Blackstone will be allotted 20,246,900 equity shares of Rs.2 each at a premium of Rs200.50 (equivalent to approximately $100 million) and 9,111,111 warrants, with an exercise period of 18 months, of Rs.225 per warrant.

Each warrant is convertible into one equity share of Rs2 each at a premium of Rs.223, (equivalent to approximately $50 million).

The all-equity investment will fetch Blackstone a 12.2-per cent stake in the company and a seat on the board.

Founded in 1978 by AVS Raju and currently led by his son, A Ranga Raju, Nagarjuna Construction, through its subsidiaries owns several infrastructure assets on a build-operate-transfer basis. Its construction services business operates in the road, water, buildings, electrical works and irrigation segments.

The company recently expanded into the power, oil and gas, and metals segments.

A Ranga Raju, managing director, Nagarjuna Construction, said "The investment will not only allow us to make additional investments in public-private infrastructure projects, but will also expand our capital base, enabling us to bid for larger projects going forward and strengthening our strategic positioning in the market."

An extraordinary general meeting of the members of the company is scheduled for 24
September, 2007, to obtain shareholder approval.

Y D Murthy, VP, finance, Nagarjuna Construction, told CNBC-TV18 that on a diluted basis, Blackstone''s stake in the company will be 12.2 per cent post warrant conversion. He added that, as of now, Nagarjuna had no plans to sell more stake and that there will be no dilution for the next two years.

He said, "They are investing about $150 million, (of which) $100 million by way of equity shares at Rs202.50 per share, and about $50 million by way of warrants, at Rs225 per warrant, out of which 10 per cent will be paid after receiving shareholders'' approval, and balance 90 per cent will come as per SEBI guidelines within 18 months.

According to Murthy, the $150 million flowing into the company will be taken for long-term projects. He added that currently the company''s funds were sufficient for the next few quarters and that it would not opt for a QIP with Blackstone''s investment.

He said, "We were actually earlier planning a QIP for which we got the shareholders'' approval for $180 million. And now with the private equity tie up with Blackstone, we will not go for the QIP, and the $150 million that is flowing into the company will be sufficient to take care of our long-term interest in terms of investment in BOT projects, power projects and seaport projects.

Kotak Investment Banking acted as the investment banking advisors to the Indian company and SSKI acted for Blackstone in the transaction.