KKR Jupiter to part finance JBF's new plant: KKR India CEO

The balance of the deal value of approximately Rs 470 crore will be invested in JBF Global Pte, a wholly owned Subsidiary of JBF Industries controlling all overseas operations, for a 16.9 percent stake.

Analysts tracking the company’s stock view this deal as beneficial in terms of value for JBF. However, they consider the reduction in promoter holding in the company to 43.1 percent post dilution, from 53.9 percent as of September 2015, as a negative.

JBF industries currently has a consolidated market cap of Rs 1600 crore.

On the recent developments on the bankruptcy code, Nayar said he sees it as a good policy reform that will help develop a strong credit market.Below is the verbatim transcript of Sanjay Nayar\\'s interview with Latha Venkatesh & Sonia Shenoy on CNBC-TV18.Latha: Tell us about JBF Industries. What made you interested in that company and what kind of interest?A: JBF is a big purified terepthalic acid (PTA) and polyester film maker. It is kind of a global company catering to global markets. A classic case of a company which is otherwise doing well has lot of capital work in progress and a new plant and for whatever reason, things get delayed and banks are not able to give the last mile financing. So you have USD 3.25 billion on the ground and you do not get the last 75 and that is where KKR with the special situation fund, was able to help them complete a fund, to complete the last mile which will otherwise jeopardise the completion of projects and some more liquidity to make sure that they have enough working capital. Therefore, we are putting in about USD 150-160 million, just short of Rs 1,000 crore and it is structured in two tranches but it is a pure equity investment from our special situations fund. It\\'s the low of the cycle and it\\'s an interesting time to get into a company like this.Sonia: Rs 1,000 crore is a big money, so what kind of growth do you see for this polyester film business? A: Polyester film is linked to consumption. It goes into consumer durables, it\\'s into consumption products. So I do not think it is going to be that great but it is pretty well architecture market, if you have the capacity, there are certain margins you make and you get the capital structure right - that is where the equity value creation in a company like this. The underlying business is a steady, solid business. It is not a tremendously high growth business but if you get the cap structure right, you get your capacities right, you get manufacturing and sales right. I think it benefits a lot. Sonia: Would you at some point look to perhaps increase stake further?A: Cannot comment on that because it\\'s too early.Latha: You also provided credit facility to Amtek. What was the nature of the help and is it equity or only debt?A: We did provide any loan to Amtek from our India business. It was done from one of our US direct lending funds that gave very structured, very interesting loan. I do not have all the details, so I won\\'t comment on that for Amtek\\'s foreign businesses. Sonia: Is that loan still intact?A: Yes.Sonia: We are trying to understand how you recover a loan in a situation like this when companies tumble like house of cards; I mean the financials of the company have been under quite a bit of stress since the time Amtek you gave out that loan?A: Our loan is in foreign company and that is totally different than the Indian venture. So I do not want to comment on the Indian side but the foreign company is doing well catering to a lot of the original equipment manufacturers (OEMs) and vehicle manufacturers overseas are doing well. Sonia: You are talking about Amtek Global Technologies?A: Yes.

Latha: You also lend some time back. We even spoke to you after that, a financing of USD 175 million to GMR. Is that the start of more lending? Has that loan been recovered or is it a longer term loan?A: It is kind of a structured loan from our non banking financial companies (NBFCs) in India and that is a solution to a situation that the group is in. It is a much longer term loan, so no question of recovering right now. It is performing absolutely well. However, this is an example where large conglomerates that have been sort of bottleneck because of delays in projects and approvals and get the capital structure little bit out of sync, I think that is where long-term callable facilities like this become extremely helpful to them. We did that in Avantha and it\\'s been absolutely fine and they got lot of time to restructure the business and make the most of it. So this kind of solution oriented mezzanine funding become very useful to Indian conglomerates because of the situations that they have landed up in, mostly because of erstwhile issues as they pertain to policies and bottlenecks and all kinds of delays that you know about.Latha: Under the new strategic debt restructuring, banks are converting their loans into equity and they are looking for people to buy up. We have Electrosteel Steels, Jyoti Structures and lately even Gammon India, about a dozen of them. Are you interested in any of them because I believe that the banks are approaching the PE guys?A: I do not think we have seen any approaches as yet. The most important thing is to see the bankruptcy code going through the floor of parliament which has now been referred to the select house. We are all trying to help out give them the right model and this government is quiet sincerely determined to get it done, which will be very positive reform. I do not think all of you talk enough about it but the bankruptcy code will lead to development of a real credit market and real mobility of assets. We are looking at asset reconstruction companies (ARCs). So we are trying to build another platform but I do not think there is any imminent action right now till the banks begin to transfer assets at a fair market value and fair market value is not the value on their books by the way. So with a step in the ARC field which we are taking, a special situation fund next to it, which will bring in a lot of money if we get the assets at the right price, I think that is when you will see the real resolution of assets and movement of assets off the banks\\' balance sheets.Latha: What is this money you are putting in the ARC. Are you buying a stake from the Tatas and the HDFC Banks or are you going to partner with them. How much are you putting in?A: The money is not fully disclosed but we will be in a majority position. The stakes are not fully disclosed. It is all pending regulatory approvals, Foreign Investment Promotion Board (FIPB) and Reserve Bank of India (RBI) but we are getting into IRC and we are not taking anybody out. We are just putting in new money to capitalise the ARC.