Naveen Jindal-owned Jindal Steel and Power Ltd has accepted a binding offer to sell its entire stake in Jindal Shadeed Iron and Steel Co LLC (JSIS Oman) to promoter company Templar Investments Ltd. JSIS Oman was held through JSPL’s subsidiary Jindal Steel and Power (Mauritius) Ltd.
The enterprise value of the deal is over $1 billion, the company said in an exchange filing.
The divestment is in line with JSPL’s vision and commitment to bring down its debt and deleverage its balance sheet, it added.
The transaction is subject to approval from shareholders of JSPL and lenders of JSIS Oman, among others. JSPL expects the transaction to close in a month. JSIS Oman, spread across 120 hectares in the port city of Sohar, has a direct reduced iron plant, a steel melt shop and a rolling mill, primarily producing steel billets and rebars.
In a press release, V.R. Sharma, managing director, JSPL, said: “This sale is in line with our vision to reduce debt and create a much healthier balance sheet for our investors and stakeholders. We firmly believe in the India growth story.”
Templar Investments Ltd, Mauritius, is an investment company and part of the promoter group of JSPL.
Alpen Capital, a West Asia-based investment bank, was appointed to run the sale process, while CMS Cameron McKenna Nabarro Olswang LLP, Oman, and Cyril Amarchand Mangaldas, India, were the legal advisers for the transaction.
Mint had reported in December 2016 that JSPL was looking to sell a significant stake in its Oman unit to meet debt repayment obligations. JSPL had acquired Shadeed Iron and Steel Co LLC from Al Ghaith Holdings PJSC of Abu Dhabi in 2010, through its subsidiary for $500 million. The company had back then raised $400 million in debt financing from a consortium of international banks, and paid the rest from internal accruals. In April 2014, the company commissioned the 2 million-tonnes-per-annum integrated steel plant in Sohar, Oman.
According to Jindal Shadeed’s website, it has made investments of over $1.1 billion.
For FY20, Jindal Shadeed reported production of 1.87 million tonnes and sales of 1.88 million tonnes. The revenue and Ebitda for FY20 was at $910 million and $138 million, respectively.
As of March-end, JSPL reported consolidated net debt of ₹35,919 crore. While JPSL paid down its net debt in FY20 by about ₹3,200 crore, it still has ₹6,100 crore of debt maturing in FY21, of which ₹3,300 crore is in overseas operations, and ₹2,800 crore in domestic operations.
A report by brokerage firm ICICI Securities said that while the domestic debt can be refinanced, overseas debt would need to be tracked closely and presents solvency risks.
