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US fund to acquire 49.4% in Jain Irrigation Systems

C.R. Sukumar

HYDERABAD, May 24

CAUGHT between severe liquidity crunch and mounting pressure from the banks and financial institutions to immediately clear overdue liabilities, Jain Irrigation Systems Ltd (JISL) has decided to raise funds by way of offering majority equity holding in the company in favour of Aqua International Partners LP.

Aqua International is a member of Texas Pacific Group, the US-based $ 10-billion private equity investment fund.

JISL, which had been undergoing a major debt restructuring exercise during the last three years, is currently suffering a major liquidity crunch following inadequate support from the creditors.

Though nearly 99 per cent of term lenders and 82 per cent of working capital lenders agreed and implemented the debt restructuring programme, some of the banks offering working capital had not released additional funds to JISL, which had resulted in a gap of around Rs 50 crore.

Meanwhile, four of the working capital lenders had decided to opt out of the consortium through a negotiated one-time settlement, subjecting the company to an additional burden of Rs 18 crore.

This apart, the company is also suffering substantial overdue liabilities such as interest, LC retirement, inter- corporate deposits and non-convertible debentures.

Keeping all these factors in view, the JISL management has decided to rope in strategic investors into the company and utilise the proceeds to pay out the overdue liabilities, get out of the current liquidity crunch, improve performance with the help of adequate resources and bring back the company into profits.

Accordingly, the JISL management had recently approached Aqua International, a $222-million investment fund, and its affiliated funds based at Mauritius.

Following detailed negotiations and discussions, Aqua associates showed interest in funding the requirements of JISL to the tune of around Rs 186 crore by way of picking up substantial equity holding in the company.

In a notice convening an extraordinary general meeting on June 10 seeking the approval of shareholders for offering majority holding to Aqua associates via preferential offer, JISL said the board proposed to offer 2.5-crore equity shares of Rs 10 each to Aqua International and its affiliates at a price not exceeding Rs 90 per share.

The company also informed the shareholders that Aqua and affiliates would end up acquiring an equity holding of 49.4 per cent on the expanded equity base of Rs 47.62 crore while the holding of promoters would come down to 35.79 per cent from the existing level of 72.27 per cent on the current equity base of Rs 22.79 crore.

JISL proposes to deploy the issue proceeds to pay the pressing creditors, redeem existing secured and unsecured debt in the form of non-convertible debentures and cumulative redeemable preference shares issued under the debt restructuring scheme, redeem optionally fully- convertible debentures issued in favour of banks and financial institutions, to fund the future capital expenditure programmes of expansion and streamlining of activities and to use the balance funds as long-term working capital.

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