JM Financial Asset Reconstruction Company is set to acquire a 30% stake in tiles manufacturer Nitco Ltd, which was formerly known as Nitco Tiles Ltd.
According to a stock market disclosure, the transaction will include a Rs 150-crore ($23.5 million) infusion into the debt-laden company by JM Financial ARC in the form of equity shares and warrants.
This apart, the asset reconstruction company will also convert a part of Nitco’s debt into equity shares, non-convertible redeemable shares and non-convertible debentures aggregating to Rs 200 crore.
On conversion of the warrants into equity, the ARC will go onto pick up a 17% stake through a fresh infusion of equity and warrants, besides a 13% stake via conversion of debt.
The deal, which is part of the company’s debt restructuring process, will also see Nitco increase its authorised share capital to Rs 230 crore from the existing Rs 60 crore.
The company’s net sales had fallen to Rs 744 crore in 2016-17 from Rs 788 crore in the previous fiscal year. It had almost halved its net losses to Rs 32.7 crore in the period under consideration.
Nitco claims to have a pan-India presence through a distribution network comprising nearly 1,200 dealers and 5,000 retail outlets.
Its manufacturing units are strategically located. While its marble division is located in Silvassa, in Dadra and Nagar Haveli, its ceramic tiles and mosaic tiles units are in Alibaug, Maharashtra.
Besides catering to the domestic market, the firm also exports tiles to the US, Belgium, Netherlands, Saudi Arabia, Bahrain, Qatar and other European and African nations.
JM Financial ARC has been acquiring bad assets of late. One of its biggest transactions took place in 2014 when it had bought the loans of Hotel Leelaventure Ltd from a consortium of banks led by State Bank of India.
Public markets-focused private equity firm WestBridge Capital Partners LLC had made stellar exits from two of its bets in the tiles space recently.
Last November, it had logged out of its six-year-old investment in Kajaia Ceramics, marking its single biggest exit in terms of total payout and one of its most profitable ever. In April 2017, WestBridge had struck another profitable exit from Cera Sanitaryware, generating an internal rate of return of about 75%.
Nitco Tiles was earlier backed by LSE-AIM listed private equity firm Elephant Capital. The PE firm had exited the firm at a loss a few years ago.