Jain Irrigation today announced plan for fund raising of approx. $200 Mn to deleverage and strengthen its balance sheet, to reduce interest cost and to balance its currency exposure with long term maturities.

1. The Securities Issuance Committee of the Board of Directors of Jain Irrigation Systems Limited have met today and decided to raise long term funds:

  (a) by way of issue of Equity Shares on preferential issue under the SEBI (ICDR) Regulations, 2009 for an amount of approx. $73 Mn (equivalent to Rs.4,050 Mn) at a price Rs.80 per share or the issue price worked out in accordance with the applicable provisions of the SEBI (ICDR) Regulations, 2009 (Regulation 76), whichever is higher.

  (b) by way of issue of Foreign Currency Convertible Bonds (FCCBs) to raise an amount upto $55 Mn (equivalent to approx. Rs.3,055 Mn) subject to regulatory approvals as may be necessary. The broad terms of the bonds are as follow:

    (i) conversion at a price of Rs.115 per Equity Share at any time during the period of 5 years.

    (ii) the FCCB shall have a coupon of 3% p.a. and Yield to Maturity of 6%.

    (iii) the FCCBs shall not be listed on any International Stock Exchanges, but the resultant Equity Shares shall be listed on the Indian Stock Exchanges.

    (iv) The FCCB’s will be repaid in one tranche after 5 years, if not already converted into equity shares.

  (c) by way of raising of LIBOR linked External Commercial Borrowings (ECB) upto an amount of $75 Mn (Rs.4,165 Mn approx.), the ECB shall have a tenor of 6-10 years. The borrowing programme will be completed once all the approvals are in place as per ECB regulations.

  (d) The Securities Issuance Committee (SIC) had already approved raising of approx. Rs.647.25 Mn by way of Equity Warrants to Promoter group on the 27th August 2012 preferential issue under the SEBI (ICDR) Regulations, 2009.

2. Thus, total combined funds being raised shall be in excess of $200 Mn (Approx. Rs.11,000 Mn). Funding is expected within the next 60 days after completion of necessary formalities and approvals etc. International Finance Corporation (IFC), part of World Bank group, is contributing significantly in the convertible bond issue, apart from participating in equity as well as ECB, part of equity funds are being raised from private equity firm, Mount Kellett; external commercial borrowing will come from combination of European Global Development Financial Institutions & Rabo Bank.

3. The proceeds of the fund raising shall be used as per the prevailing permitted end use applicable to the fund raising by way of FCCBs and ECBs.

4. End use of funds, including equity shall cover:

  (a) Repayment of all

     i) the high cost short term loans of the Company, and its subsidiaries; and

     ii) the long term loans of the Company due in FY2013, and its subsidiaries.

  (b) Investment into Company′s overseas subsidiaries to enable their continued growth.

  (c) Any other corporate use including capital expenditure.

  (d) The Equity Investment into ″Sustainable Agro Commercial Finance Limited″ (SAFL); the Jain NBFC.

5. The Company plans to convene an Extraordinary General Meeting to seek approval of the Shareholders for the above Equity and FCCB issuances and the related issues.

Mr Anil B Jain, Managing Director of the Company said after the meeting of the Securities Issuance Committee of the Board that ″We are glad that we have been able to put together significant resource raising at fairly attractive terms from quality investors like International Finance Corporation (IFC), Lenders like Rabo bank and others during these volatile and challenging environment and uncertain market conditions.

We believe equity issuance is value accretive and shall help us to deleverage our balance sheets, convert short term liabilities into long term liabilities and also provide liquidity for operations while strengthening and re-rating our balance sheet.

We expect annualized savings on interest alone to be in range of Rs.800 to 1,000 Mn resulting in better bottom line and expect to improve our gearing which shall further improve our credit rating in market.

With this fund raising the Company will be able to match it currency liabilities with its foreign currency earnings from exports as well as overseas subsidiaries thus nullifying any impact of rupee depreciation.

As conveyed to all our stakeholders over last few months, we are going through a business model change and hence this fund raising will provide crucial support during this period.

We aim to manage this change with focus on creating free cash flow and creation of sustainable growth from internal accruals, in medium to long term, across all our business lines. We continue to maintain leadership position in most of the markets we serve, covering different product lines. Receiving government subsidy receivables has gained momentum and we expect to have significantly improved position in remaining part of the financial year on this account.

We thank all our stakeholders for their support, while Company moves from strength to strength. We will continue to address the triple issue of water, food and energy security with the help of our products and services.

Jain Irrigation Systems Ltd. (JISL) is the largest Company in Asia in the field of drip irrigation and second largest in the world. JISL has a multi product industrial profile aimed at the farmer community spread largely in the rural and semi-urban areas all over India. The major and substantive portion of the business relates to Micro Irrigation Systems (MIS) and Plastic Pipes. Other business include food processing, onion dehydration, tissue culture, solar appliances and a large training center devoted to farmer training. Jain Irrigation annual turnover stands at $1 Billion approx. with global presence in 120 countries and 4 continents.

For more information, visit www.jains.com

Jain Irrigation declares steady operating results for Q1 FY2013 ( PDF )