Polyester chips maker JBF Industries, that is backed by Citigroup Venture Capital International (CVCI), is raising Rs 125 crore ($ 27 million) through issue of cumulative redeemable preference shares to state-controlled lender Bank of India.
Although the firm has not disclosed for what purpose it has raised the fund for, it could be to reduce debt as the company has seen its interest payments balloon over the recent past. For instance, at a standalone level, JBF had total interest payment of Rs 51 crore for the year ended March’10.
In contrast, its interest payment for the first nine months of the current fiscal has already rocketed to Rs 111 crore. For the quarter ended December’10 alone, it paid Rs 51 crore as interest.
JBF had last November acquired 100% control over its Singapore arm JBF Global Pte Ltd (which, in turn, is a holding Company of JBF RAK LLC, UAE) by purchasing all of CVCI’s equity in the Singapore firm for $104.41 million.
JBF Industries had, early last year said, it was buying out two-thirds of total convertible holdings of CVCI in JBF Global Pte Ltd, Singapore for approximately $60 million. This means CVCI generated 38% return on its three-year-old investment, not counting dividend earnings.
In a recent interview to CNBC, Rakesh Gothi, MD of the firm, had said that CVCI had injected $75 million into JBF Global subsidiary at Singapore for acquiring a stake of 33% in that subsidiary in December 2007. JBF Global Singapore has a 100% holding in JBG RAK, the UAE subsidiary.
“Since then, we have bought over 22% of CVCI stake that is about $50 million worth at a price of $62 million. In October end, we got the board approval for acquiring the balance 11% stake and hence we have decided to acquire it (the balance 11% which was their investment of around $25 million) at a price of around $40 million,” he had said in that interview.
Of the total amount, $30 million is by way of borrowings and the balance would be through internal accruals, Gothi had said. According to him, the exceptional performance of JBF RAK unit at UAE is the reason why the company was looking at a 100% holding in JBF Global Singapore.
CVCI has also been on an exit mode from JBF. In July, it sold 14.3% of its 20.4% stake in JBF Industries after selling a small chunk of shares in the three months to end June. In an open market deal, it sold shares worth Rs 120 crore. It made almost 3x on its five-year-old investment selling shares at Rs 135.1 per share compared to investment cost of Rs 46.5 per share in June 2005 when it invested through preferential allotment and warrants.
As of December 31, CVCI still owned 5% stake that is worth Rs 57 crore as of Thursday.