Jindal Steel & Power Ltd is selling its Oman unit to Templar Investments Ltd, a Mauritius-based company owned by its own promoter group, as part of efforts to cut its debt.
Templar will acquire Jindal Shadeed Iron and Steel Co LLC at an enterprise value—which takes into account debt and cash reserves—of over $1 billion (Rs 7,550 crore), Jindal Steel said in a statement.
Jindal Steel, led by former lawmaker Naveen Jindal, had acquired Shadeed Iron in 2010. The Oman unit had standalone debt of Rs 5,619 crore as of March 31, according to Jindal Steel’s investor presentation last month.
In a separate stock-exchange filing, Jindal Steel said the equity value of the transaction is $251 million (about Rs 1,896 crore). Templar will pay this amount through a mix of cash and taking over the company’s liabilities, it said.
“This sale is in line with our vision to reduce debt and create a much healthier balance sheet,” said VR Sharma, managing director at Jindal Steel.
Jindal Steel’s consolidated net debt was Rs 35,919 crore as of March 31, the investor presentation showed.
The deal needs approval from Jindal Steel’s shareholders and lenders as well as the capital markets regulator, but the company said it expects to complete the transaction within a month.
Alpen Capital, a UAE-based investment bank with operations in the region and India, was the adviser on the transaction.
CMS Cameron McKenna Nabarro Olswang LLP, Oman and India’s Cyril Amarchand Mangaldas acted as legal advisers on the transaction.
Shares of Jindal Steel were trading 4.42% down at Rs 154.45 apiece at the time of writing this report.
As per the investor presentation, it reported a consolidated net revenue of Rs 36,944 crore for the financial year ended March 2020, with a loss of Rs 400 crore for the same period. The Oman unit's revenue was Rs 6,452.55 crore for 2019-20. This is 17.5% of Jindal Steel's total revenue.
The company has been making moves to pare down debt for the past few years.
In October 2016, for example, it signed a deal to divest a wind power business in Maharashtra to IDFC Alternatives, which was acquired by global alternative investment manager Investcorp last year.
Also in 2016, Sajjan Jindal-led JSW Energy Ltd agreed to buy a thermal power plant in Chhattisgarh’s Raigarh from Jindal Steel for up to Rs 6,500 crore ($975 million) including debt. However, in July last year, JSW Energy terminated the deal following stipulated conditions for the acquisition not being met.
