Kohlberg Kravis & Roberts (KKR), one of the top-tier alternative investment asset managers in the world, has entered into a definitive agreement to invest $150 million (Rs 962 crore) in Mumbai-based listed polyester maker JBF Industries Ltd and its overseas arm, according to a press statement.
The firm will acquire 20 per cent stake in JBF Industries and will also invest in zero-coupon compulsorily convertible preference shares with 14.5 per cent voting rights in its Singapore-based wholly owned subsidiary JBF Global Pte Ltd.
Of the total, KKR will invest Rs 491 crore to buy the stake in the listed firm at Rs 290 a share through a preferential allotment. The balance will be invested to buy 12.2 million convertible preference shares of JBF Global.
KKR, which specialises in leveraged buyouts globally, will primarily make its investment from the KKR Special Situations Fund II. This is the first investment in India from this new fund.
"The funding provided by KKR will help JBF complete our ongoing projects. KKR's support will better enable JBF to grow its international presence and support the Make in India campaign," said Bhagirath Arya, founder and executive chairman of JBF.
JBF Industries was founded in 1982 by Arya as a yarn texturing company and went public in 1986. It manufactures polyester products ranging from polyester chips, polyester yarn and films which are used in fast-moving consumer goods, textile and packaging industries. The company has six manufacturing facilities across India, Bahrain, Belgium and the United Arab Emirates.
"This type of investment into a world-class company such as JBF is a great example of how KKR can support Indian manufacturing companies providing value to global customers,” Sanjay Nayar, member and CEO of KKR India, said.
Fortune Financial & Equities Services Pvt Ltd acted as the exclusive financial advisor to JBF Group.
This is the second time JBF has inked a PE deal with a similar structuring. In 2005, it had roped in Citigroup Venture Capital International (CVCI) as a shareholder and two years later CVCI committed additional money to the Singapore-based holding arm of its international operations. CVCI, now owned by The Rohatyn Group, had exited JBF in 2010-11. It sold shares in both JBF and the Singapore arm, making a profitable exit in the process. It offloaded the shares of the listed firm in the secondary market while JBF bought back CVCI's stake in the overseas arm.
JBF's consolidated revenues have risen by 37 per cent between FY11 and FY15 but its net profit declined sharply during the period. For the year ended March 31, 2015, JBF reported net revenues of Rs 8,879 crore with net profit of Rs 31 crore. High cost of servicing debt had been eating into its margins.
The company's share price has doubled since last November.
For KKR, which recently marked its debut exit from India by selling its stake in Bharti Infratel, this is the third recent deal in India after it invested in NBFC Magma Fincorp and backed power solutions firm Enzen Global, according to VCCEdge, the data research platform of VCCircle.
This is also its biggest new investment in India after it bet around $200 million in Gland Pharma a little over a year ago.