Jindal Poly Films inks Rs2,000 crore equity deal with Brookfield for a minority stake in its packaging films biz; Stock jumps 4%

17 Mar 2022 , 09:52 AM

Jindal Poly Films Limited (“JPFL”) has signed an agreement for the sale of a minority stake in its packaging films business to Brookfield Asset Management (NYSE: BAM, TSX: BAM.A), which, through its Special Investments program (“BSI”), and together with institutional partners (collectively “Brookfield”), has agreed to make an Rs2,000 crore investment in the company.

Further, the transaction will result in JPFL carving out its packaging films business, which generates approximately 85% of its total revenue, into a wholly owned subsidiary in which BSI will hold a minority stake. JPFL will continue to own its non-woven business unit and other corporate assets.

At around 9:56 AM, Jindal Poly Films was trading at Rs1,330.65 apiece up by Rs52.5 or 4.11% on Sensex.

The structured equity investment in JPFL consists of compulsory convertible preference shares and equity shares of the new subsidiary, giving BSI a 25% stake and downside protection through a ratcheted equity structure tied to financial performance. BSI has also entered into an investor rights agreement.

“We are proud to enter a strategic partnership with a large global investor such as Brookfield. Having access to their international network greatly broadens our horizons. The transaction is a testament to JPFL’s leadership position and growth potential,” stated Vinod Kumar Gupta, Chief Executive Officer of JPFL. “Brookfield’s presence on the board of this new subsidiary will also facilitate benchmarking to international governance standards and best practices.”

“We are pleased to partner with JPFL, India’s leading manufacturer of flexible plastic films for the packaging industry, which plays an essential role in the preservation and hygiene of products in different sectors such as food and healthcare. In partnership with Jindal, we aim to help the company maintain its strong track record of growth,” commented Dev Santani, Managing Director of BSI.

“BSI is sector agnostic and invests in large-scale, non-control (minority) investments where we can provide capital and be a strategic partner to leading companies. We intend to continue to scale our BSI investments in India and be a partner of choice,” added Santani.

The transaction is subject to customary approvals and is expected to close during the first half of fiscal year 2023.