Jain Irrigation plans to raise Rs 792cr via equity issuance

Jain Irrigation plans to raise Rs 792 crore through equity issuance. It will issue 1.4 crore equity warrants to promoters at Rs 80 per warrant and 3.6 crore convertible debentures for Rs 289.6 crore.

The company's subsidiary Jain Farm Fresh Foods' (JFFFL) board plans to issue shares and debentures worth Rs 402 crore. It has decided to raise Rs 396 crore from Mandala Capital — a firm focused exclusively on long-term investments in the food industries — subject to regulatory requirements.

"These funds will be raised by JFFFL making a preferential issue of equity shares and compulsorily convertible debentures (CCDs) for a total subscription amount of approximately Rs 390 crore. The CCDs will be converted into further equity shares of JFFFL within 60 months from the date of allotment at an issue price determined according to whether JFFFL achieves certain value and revenue targets such that Mandala will receive a minimum stake of 14.08 percent in JFFFL, upon conversion of the CCDs. If the value and revenue parameters are achieved by JFFFL or will otherwise receive a maximum stake of 17.13 stake in JFFFL," the company said in a statement to the Bombay Stock Exchange (BSE).Anil Jain, MD of Jain Irrigation says the overall valuation of the company is around Rs 3,000 crore. Now, just a small part of the subsidiary (JFFFL) is getting valued at that level. "So, at about approximately 14 percent of dilution into the food subsidiary we should get about close to Rs 400 crore into that subsidiary," he says.Below is the verbatim transcript of Anil Jain’s interview with Anuj Singhal and Ekta Batra on CNBC-TV18.Anuj: We were talking to you about two days back and you said it will be speculative but I believe you have made the BSE announcement now in terms of fund raising if you could confirm and if you could give the price point at which the preferential allotment has been made?A: The total equity issuance is total USD 120 million. USD 60 million is being raised into our food processing company which is a 100 percent subsidiary of Jain Irrigation. Now, that is being done at a valuation close to about Rs 300 crore. So, if you see the overall valuation of Jain Irrigation alone is around Rs 3,000 crore. Now, just a small part of the subsidiary itself is getting valued at that level. So, at about approximately 14 percent of dilution into the food subsidiary we should get about close to Rs 400 crore into that subsidiary.In addition, we would be raising another almost same amount at the parent itself at Rs 80 per share. So, both of this put together should raise about Rs 792 crore. Now, what this does going forward is that it will bring down our debt and improve the equity so we are hoping that in next two to three quarters, our debt equity ratio will be down to 1:1 so that would be a significant improvement in our debt situation which can reduce the interest and improve profitability going forward. Ekta: Largely your debt figures are known but just to reiterate, pre-transaction and post-transaction what would it look like in terms of absolute debt figures as well as in your debt equity? A: If you just look at March 2015, debt was about Rs 3,900 crore approximately consolidated debt for the whole company. We were planning to reduce some debt through our improved cash flow and some amount of debt through this fund raising. So, we are expecting by March 2016 or somewhere around that period of time the debt to be down to close to Rs 3,000 crore and equity which was close to Rs 2,100 crore odd for the company, with this equity issuance will also go close to Rs 3,000 crore and that is how we should end up in next few quarters, debt equity of 1:1 and debt going down significantly. Anuj: What is the next plan with Jain Farm Fresh Food, do you plan to list it separately, is that on the anvil or are you done with the kind of fund raising that you have done? A: As of now this fund raising is good enough to sustain more than 20 percent growth rate into Jain Farm Fresh Food and once the company goes to the next level because the current year it is expected that this entity should close to about revenue of Rs 1,700 crore and EBITDA of about Rs 250 crore or so. So, we have got a very good multiple in terms of valuation. Anuj: Not in the near-term but as your game plan do you see it listed over the next two years or so? A: I won’t say two years or particular time but it would get listed ultimately in future. Ekta: Would there be further dilution? Beyond that would Mandala be looking to maybe invest or increase its stake in any of your other businesses or maybe in the main business itself?A: In Jain Irrigation Systems (JISL) they are also taking equity. If you see the press release, they are already taking about 6.5 percent stake in JISL at Rs 80 and they have already invested into our NBFC earlier this year. So, there is lot of investment made by them. As and when Jain Food further grows and may need capital maybe after few years, one would look at it at that time. However, as of now this fund raising is good enough to sustain high-teen level of growth for existing JISL businesses especially for the food business.