With an objective to deleverage its balance sheet, Jain Irrigation on Tuesday announced the merger of its wholly-owned subsidiary Jain International Trading BV with Temasek-owned Rivulis Pte, Singapore. The development will create a global irrigation and climate leader- being the second largest in the world with around $750 million in revenues.
Jain Irrigation said that cash proceeds will be utilised for the reduction of consolidated debt of the company by around 45 per cent which includes all the restructured overseas bonds to the tune of $225 million and complete debt of overseas operating companies comprising of international irrigation business.
Anil Jain, managing director, Jain Irrigation said, “Jain Irrigation international irrigation business valued close to Rs 4,200 crore. The merger will reduce the overseas debt by close to Rs 2,700 crore. We are also signing a 10-year supply agreement with the company. This would ensure India standalone business will continue to export.”
Jain International Business will continue to hold a stake of around 22 per cent stake in the merged entity with Temasek holding the balance of 78 per cent. Jain Irrigation will also get to release its corporate guarantee given by Jain Irrigation, India of Rs 2,275 crore to bondholders and International Irrigation Business lenders.
“Jain Irrigation will have a long-term supply agreement with the merged entity, which would drive revenues and profits. The merged entity will continue to use and promote prominent JAIN Brands in markets where they have significant presence and value,” Jain Irrigation said in a release.
Earlier in the day, shares of Jain Irrigation closed 20 per cent higher at Rs 37.50 ahead of the development on Tuesday. On the other hand, the benchmark equity index BSE Sensex settled 1.81 per cent up at 52,532.07.
“Going forward Jain Irrigation will focus on further improving on the India business to drive higher growth and margin in one of the fastest growing irrigation markets in the world, and eventually aim to reduce debt on the standalone Indian business balance sheet as well – as agreed with the lenders in the recent restructuring,” the company said in a release.
Jain further added that the merger with Rivulis will create a world-leading player ideally placed to serve its global customer base thanks to its geographic footprint, breadth of offerings as well as technological depth and expertise in micro-irrigation.
“This will enable us all to address climate change and food security challenges with sustainable solutions and implement the critical knowledge transfer for water efficiency and productivity for growers,” he said.
The transaction is subject to required regulatory approvals and other customary closing conditions and is expected to be completed by early 2023. Goldman Sachs acted as financial advisor, Baker McKenzie acted as legal advisor and PWC acted as tax and diligence advisor to JITBV for the transaction.
Net debt of Jain Irrigation stood at Rs 6,000 crore as March 31, 2022, according to Jain. “We have plans to deleverage more going ahead,” he said.
Also Read: BAYC accused of discrimination; faces flak on Twitter