Jain Irrigation Shares Surge 17% On Temasek Deal
Jain Irrigation jumped to a two-month high after the company agreed to merge its international irrigation business with Rivulis.
Shares of Jain Irrigation Systems Ltd. jumped to a two-month high after the company agreed to merge its international irrigation business with Temasek-owned Rivulis.
The merged entity will now be the “second-largest in the world with Rs 5,860 crore in revenue”, Jain Irrigation said in a statement on Tuesday. Jain International Business will continue hold about a 22% stake, while Temasek will own the rest.
This transaction, once closed, will result in substantial reduction in Jain Irrigation’s consolidated debt by about 45% (Rs 2,664 crore) and lower the interest cost. “This will enable the company to refocus its efforts to grow business in India, while further deleveraging the standalone India balance sheet.”
Even though the deal took some time to happen, it’s one where “ethos are based on medium to long-term”, Managing Director Anil Jain told BQ Prime’s Niraj Shah in an interview. “We’re creating a much larger entity globally which can address climate change and significantly grow from where we are today.”
The association with Temasek, according to Jain, is also a highlight of the deal. “There’s a possibility that we'll do something more with Temasek in India. There’s no certainty, but the next step would be to explore what more we can do with them in India in the agri-value chain.”
The two, according to the statement, might collaborate in areas relating to ESG, hi-tech agricultural inputs, technology innovation and benefitting small farmers.
The potential future dealings with Temasek, Jain said, could be of a nature where the Singapore-based fund comes on board as a shareholder, like it was back in 2005. “They exited in 2011-12, making 5X returns. So they have happy memories of dealing with us.”
The focus for Jain Irrigation now comes to debt reduction. “Over the next 2-3 years, through internal accruals and cash flow generation, the aim is to further reduce debt.”
The merged entity will be dual headquartered in Singapore and Israel and will continue to be named Rivulis Pte Ltd.
Current Rivulis Chief Executive Officer Richard Klapholz will continue to lead the company, while senior associates from Jain Irrigation’s international business are expected to remain in leadership roles.
The transaction is subject to required regulatory approvals and other customary closing conditions and is expected to be completed by early 2023.
Shares of Jain Irrigation surged as much as 17%, the most since April 25, before closing 10.5% higher. This is after a 20% uptick in Tuesday’s session.
Trading volume is more than 78 times the 30-day average. The stock isn’t under coverage by analysts tracked by Bloomberg.
Watch the full interview here: