In a bid to unlock value, Delhi based Jindal Poly Films Limited (JPFL), a part of the BC Jindal Group, has signed an agreement for the sale of a minority stake in its packaging films business to Brookfield Asset Management. The move comes on the back of a sharp rise in the demand for packaging and hygiene products in the COVID-19 era.
JPFL will carve out its packaging films business into a wholly owned subsidiary (which generates around 85 per cent of the firm’s total revenues) and the Canadian investment giant will make an investment of Rs 2,000 crore. JPFL will continue to own its non-woven business unit and other corporate assets.
The structured equity investment in JPFL consists of compulsory convertible preference shares and equity shares of the new subsidiary, giving Brookfield a 25 per cent stake and downside protection through a ratcheted equity structure tied to financial performance, according to a late evening disclosure to the bourses on 16 March. The Canadian investor has also entered into an investor rights agreement. Investment bank Rothschild is learnt to be the sell side advisor for the transaction.
"We are proud to enter a strategic partnership with a large global investor such as Brookfield. Having access to their international network greatly broadens our horizons. The transaction is a testament to JPFL's leadership position and growth potential," stated Vinod Kumar Gupta, chief executive officer of JPFL.
"Brookfield's presence on the board of this new subsidiary will also facilitate benchmarking to international governance standards and best practices,” he added.
"We are pleased to partner with JPFL, India's leading manufacturer of flexible plastic films for the packaging industry, which plays an essential role in the preservation and hygiene of products in different sectors such as food and healthcare. In partnership with Jindal, we aim to help the company maintain its strong track record of growth," said Dev Santani, managing director of Brookfield’s Special Investments Business.
"Special Investments Business is sector agnostic and invests in large-scale, non-control (minority) investments where we can provide capital and be a strategic partner to leading companies. We intend to continue to scale our Special Investments Business in India and be a partner of choice," added Santani. The transaction is subject to customary approvals and is expected to close during the first half of fiscal year 2023.
JPFL is one of the world's leading firms in manufacturing flexible plastic films and non-woven fabrics products. It provides a wide range of products including BOPP, BOPET, CPP, and other specialised films deriving significant economies of scale through its single location integrated plant in Nashik, Maharashtra, the world's largest. The products are used in packaging for food and cosmetics, labels, tapes, and various other industrial segments. It also provides non-woven fabrics which find application in hygiene, baby diapers and other medical applications,
Brookfield has been present for over 11 years in India and has $20.6 billion of assets under management across infrastructure, real estate and renewable energy.
Deal activity in packaging segment
The packaging industry has seen a lot of M&A action since private equity fund Advent International gave an exit to Kedaara Capital and purchased a controlling stake in Manjushree Technopak in 2018. According to reports, the transaction valued India’s largest rigid plastics manufacturing company at over Rs 2,400 crore. Since then Manjushree Technopak has gone on to acquire Pearl Polymers & National Plastics.
In late 2020, in the largest ever transaction involving an Indian packaging company, Blackstone acquired glass packaging manufacturer Piramal Glass at a valuation of $1 billion. Then Warburg Pincus picked up a majority stake in Parksons Packaging, India’s largest independent folding carton maker, in April 2021.
In the same month, Moneycontrol reported that Delhi based multinational packaging firm Polyplex Corporation had engaged Goldman Sachs as advisor to explore the sale of a controlling stake.
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