Carlyle Group to invest $500 million in India-focused Magna Energy

US-based private equity firm Carlyle Group on Monday said it will invest $500 million in Magna Energy Ltd, an India-focused oil firm founded by Mike Watts, the man who saw oil in Rajasthan's Thar desert where global giant Royal Dutch Shell saw none.

Carlyle, the second private equity fund after Warburg Pincus to have backed management team in creation of upstream firm, will fund Magna's bit to become a full-cycle oil and gas company through acquisitions and by securing local licences in India.

Magna, Carlyle Group said in a statement, will primarily focus on development and production with a secondary focus on exploration.

This is the single-largest private equity funding transaction in the Indian oil and gas field, a sector largely dominated by large established firms.

Watts, who superannuated as Deputy CEO of Cairn Energy in 2014, had founded Magna with his former CFO-turned-Managing Director Jann Brown to invest in oil and gas fields in South Asia.

Magna plans to bid for small and medium sized fields which are to be auctioned by the government later this fiscal as also in future exploration licensing rounds, he told PTI.

Watts, the former Exploration Director with Cairn Energy plc of UK, was the person who first discovered natural gas in KG basin block in 2001, a year before Reliance Industries' struck in the neighbouring KG-D6 block, and then struck Mangala oilfield in Rajasthan in 2004 - the biggest onland oil discovery in the country.

He was the person who convinced Cairn Energy board to acquire the Rajasthan block from Shell, which wanted to exit the block as it saw little hydrocarbon potential.

"Magna's expertise combined with additional capital and significant industry knowledge from Carlyle will help further develop the local oil and gas industry across the Indian subcontinent, leading to greater energy security, job creation and economic growth," the statement said.

Magna holds a 17% stake in Oilex Ltd that owns a gas field in Cambay basin in Gujarat.

It will bid for oil fields when the government comes out with auction under the New Exploration Licensing Policy.

Funding for the Magna investment will come from Carlyle International Energy Partners, a fund that focuses on oil and gas investments in Europe, Africa, Latin America and Asia.

Washington-based Carlyle Group has over USD 193 billion of assets under management.

In 2013, Warburg Pincus backed Delonex Energy, an Africa focused energy exploration and production company floated by Rahul Dhir, former CEO of Cairn India.

Dhir led Cairn India after its former promoter Cairn Energy transfered India assets into a new firm and listed it on stock exchanges. Cairn Energy sold its majority stake in Cairn India to Vedanta Resources in 2011. 

Brown and Watts, Magna co-founders and joint chief executive officers, feel there is strong growth potential in countries such as India, Bangladesh and Myanmar, which seek to grow their local energy markets.

"Furthermore, we are excited at the prospect of helping to drive economic growth in the Indian subcontinent by bringing new technology and capital to the local oil and gas sector—India, in particular, is set to emerge shortly as the world's fastest growing major global economy," the statement quoted them as saying.

Magna's primary focus will be development and production with a secondary focus on exploration. "Magna's expertise combined with additional capital and significant industry knowledge from Carlyle will help further develop the local oil and gas industry across the Indian Subcontinent, leading to greater energy security, job creation and economic growth," the statement said.

Watts and Brown said: "We are excited at the prospect of helping to drive economic growth in the Indian subcontinent by bringing new technology and capital to the local oil and gas sector – India, in particular, is set to emerge shortly as the world's fastest growing major global economy." Marcel van Poecke, Managing Director, and Head of CIEP, said the investment will help fund Magna's development and production plans, allowing it to focus on cash generative and organic growth opportunities in the oil and gas sector across the subcontinent.

"CIEP will provide capability and support through its global energy platform as we seek to participate in the economic growth of India and neighbouring countries. Our investment will help fund Magna's development and production plans allowing it to focus on cash generative and organic growth opportunities in the oil and gas sector across the subcontinent," Poecke said.