Domestic metals and mining company Jindal Steel and Power Ltd (JSPL) has revised the divestment plan of the company’s subsidiary Jindal Power Ltd (JPL) and has offered a revision from Worldone, a promoter entity.
The decision to revise the offer was arrived at after taking into consideration the investor feedback received by the company after its initial offer in May, which had drawn flak from a section of investors who cited low valuation of the deal and related party nature of the transaction as contentious issues, the company said on Sunday.
Worldone will buy out all the equity shares and redeemable preference shares of JPL held by JSPL for a total consideration of approximately ₹7,401 crore, of which ₹3,015 crore will be payable by cash and the remaining approximately ₹4,386 crore will be by way of assumption and takeover of liabilities and obligations of JSPL in relation to inter-corporate deposits and the capital advances extended by JPL to JSPL, according to the revised offer, the company said.
“In this revised proposal, the debt of ₹4,386 crore of JPL is taken over by the promoter company from JSPL. It is good that going forward there will be no link between JSPL and JPL," said Shriram Subramanian, founder and managing director of InGovern Research Services, which specializes in research and advocacy on corporate governance and had opposed the initial divestment proposal.
“However, shareholders of JSPL need to evaluate whether the enterprise value of JPL at which the promoters are buying is in line with market valuations. While the company has said that a transparent bidding process will be adopted, it is highly unlikely that any bidder will emerge given that they will be competing with the promoter in the bidding process," Subramanian said.
JSPL has, however, maintained the revised offer is simple and straightforward where there will be no continuing financial link between JSPL and JPL after the divestment. This was one of the key demands by JSPL’s investors during the feedback sessions held earlier and has been addressed comprehensively, it said.
JSPL also said that it has taken the decision to undertake a competitive bidding process to realize the highest value possible from the JPL stake sale, using the revised offer of ₹7,401 crore as the base offer. The bidding process will be advertised in the public domain and will present an equal opportunity for interested bidders from around the world to come forward and improve or better the revised offer of ₹7,401 crore.
“JSPL has been able to negotiate an improved revised offer accommodating all the investor feedback received over the last several weeks. JSPL has also announced that it will undertake an additional transparent competitive bidding process open to the world at large to see if the firm can secure an even higher value than the present revised offer by Worldone. JSPL is fully committed to its primary goal of value maximization from the JPL divestment and protecting the interests of all its stakeholders, including its minority shareholders," said the management.
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JSPL revises disinvestment plan for arm - Mint
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