Jain Irrigation to merge global business with Rivulis of Temasek

BL Mumbai Bureau | | Updated on: Jun 21, 2022

Expected to be closed by next year, the merger will bring down the irrigation firm’s debt by ₹2,700 crore

Jain Irrigation System plans to merge its wholly-owned subsidiary Jain International Trading BV with Temasek-owned Rivulis Pte Singapore and reduce its debt by about ₹2,700 crore, besides bringing back ₹200 crore to India.

The international irrigation business will now be merged with Rivulis and become the second-largest in the world with a revenue of $750 million. Jain Irrigation will hold 22 per cent stake in the merged entity.

The deal will reduce the consolidated debt of Jain Irrigation by 45 per cent which includes all the restructured overseas bonds of $225 million and remove the contingent liability of $330 million.

Jain Irrigation will also get to release its corporate guarantee given by Jain Irrigation, India, of ₹2,275 crore to bondholders and international investment bank lenders. The deal is expected to be closed early next year.

10-year supply agreement

The company will also sign a 10-year supply agreement with the merged entity, which would bring in revenue of ₹200-250 crore. The merged entity will continue to use and promote Jain brands in markets where it has significant presence and value.

The consolidated net debt of ₹6,000 crore, as of March-end, will come down to ₹3,300 crore after repayment of ₹2,700 crore debt as and when the deal is closed. The consolidated annual interest payment will come down to ₹225 crore from ₹445 crore after repayment of debt. The international business of Jain Irrigation, which had a revenue $350 million and Ebitda of ₹350-360 crore last year, was valued at ₹4,200 crore.

Jain will have representative directors and observer on the board of the merged company and will be able to help drive growth through its expertise in micro-irrigation. The merged entity will be headquartered in Singapore and Israel and will continue to be named Rivulis Pte.

Anil Jain, Managing Director, Jain Irrigation, said the company has reworked its business in India by routing 80 per cent of sales through dealers and thereby reducing dependence on subsidiary recovery from the Government.

Moreover, he said the Union government has created a separate account for disbursal of subsidiaries and cannot be routed to other expenses.

Going forward, the company plans to focus on high margin business and eventually aim to reduce debt on the standalone Indian business balance sheet as agreed with the lenders in the recent restructuring.

Richard Klapholz, CEO of Rivulis, said before the merger, Rivulis represented the combination of four companies and through this merger, several more companies from Jain Irrigation’s portfolio will be added, cementing the role as a market consolidator and leader across the globe.

Published on June 21, 2022
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