A distressed private equity firm set up by three former Goldman Sachs special situations executives has joined the investment arm of the World Bank for an INR4.05bn ($72m) investment into India’s Jain Irrigation Systems.
The company, which currently ranks as Asia’s largest maker of irrigation equipment, said it has agreed to issue equity shares to Mount Kellett and IFC at INR80 per share, equivalent to an almost 25 per cent premium to Tuesday’s closing price of INR64.2 per share.
Mount Kellett Capital is leading the financing with an INR3.49bn investment in return for a 9.8 per cent stake in Jain, which also counts Singapore sovereign wealth fund Temasek among its investors.
IFC will invest INR560m for a 1.6 per cent interest – increasing its existing investment in Jain to 3.31 per cent.
Jain’s share price recently hit a three-year low following a change in strategy that has resulted in reduced earnings.
The investment will help the company reduce its consolidated gross debt, which stood at INR39bn ($680m) at June 2012.
“We expect annualised savings on interest alone to be in range of INR 800m to INR1bn resulting in better bottom line and expect to improve our gearing which shall further improve our credit rating in market,” Jain said in a statement.
Jain is also raising a further INR7.21bn ($129m) through external commercial borrowings and foreign currency convertible bonds.
Mount Kellett is currently investing through its second distressed private equity fund, which closed in April on more than $4bn.
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