Jindal Poly Film - Looks like a very good bargain

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As per my understanding of the case :slight_smile:

  • Kolkata-based Soyuz Trading and Rishi Trading, owned by the Shyam Jindal family, are promoter group firms of JPFL.

  • Rishi and Soyuz, together, floated a company called Anchor India Image & Films.

  • Three months after the announcement of the agreement with ExxonMobil, in January 2013, Anchor India floated a subsidiary in Singapore called Anchor Image & Films Singapore with an investment of $62,000 (Rs 34 lakh at forex rates of January 2013).

  • Soon, Anchor Singapore subscribed to 49 per cent shares of JPF Netherlands for 41,000 Euros (Rs 30 lakh), while 51 per cent was owned by Jindal Poly Films.###

  • JPF Netherlands was used to acquire the ExxonMobil BOPP business.

  • Guarantees and shareholder approval
    Funds for the acquisition were raised by JPF Netherlands from the London branch of the SBI, the Exim Bank and Societe Generale, in Paris.

  • These loans were secured by corporate guarantees given by JPFL.

  • The loans with State Bank of India, London branch and Export Import Bank of India are secured by a guarantee of the parent company Jindal Poly Film and requires Jindal Poly films to maintain certain financial ratios and comply with certain financial covenants on a consolidated level.

  • Anchor Singapore did not give any such guarantees.

  • The resolution for approval of these guarantees and the explanatory statements therein, which was put up to shareholders through postal ballot in October-November 2013, was silent about promoter interest in the transaction.

  • In August 2016, S.R. Dinodia & Co, the independent valuers hired by the company, valued JPF Netherlands at Rs 8,247.7 crore based on discounted cash flow basis.

  • Two months after this valuation report, Anchor Singapore announced a buyback of shares held by Anchor India and other group entities such as Jindal Photo and Jindal Films India.

  • Following this, Anchor Singapore was merged with a company called Global Synergy, which is fully owned by Dubai-based Synergy Consultancy and Management Services.

  • JPFL has not given details about the ultimate owners of this Dubai-based entity.

Summary :slight_smile:

  • The acquisition of Exxon mobile was totally debt funded with Equity infusion of merely 84000 in JPF Netherlands by Jindal Poly India (51%) and Anchor Singapore (49%).

  • The debt was raised purely on the strengths of Corporate Guarantee of Jindal Poly India.
    *There was no financial standing of Anchor Singapore and hence there was no relevance of Corporate Guarantee of Anchor Singapore.

  • As there was no equity (only Euro 41000 i.e Rs 30 lac) contribution by Anchor Singapore, the structure of JPF Netherlands should have been 100% shareholding of Jindal Poly Films India.

  • ###There was no need of subscription of 49% sahres of JPF Netherlands by Anchor Singapore and this was done only to dupe shareholders of Jindal Poly India and personally benefit the holding companies of Promoters.

  • Anchor Singapore (Promoter entity) got 49% shareholding in acquired buisness of Exxon Mobile through a paltry investment of EURO 41000 i,e Rs 30 Lac at the cost and expenses and liability taken by (shareholders of) Jindal Poly Films India as it had given Corporate Guarantee to the Banks who had lended to JPF Netherland.

  • If suppose JPF Netherland would have defaulted and decalred Bankrupt than Jindal Poly India, apart from writing off its equity investment of EURO 42000 would have also been required to pay the loan availed of EURO 135 Million whereas Anchor Singapore (Promoter entity) would have been required to write off only and only equity investment of Euro 41000 as it has not given any Corporate Guarantee.

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  • Clearly the odds are in favor of shareholder of Anchor India (Promoter entity) as agaisnt shareholders of Jindal poly India.

  • This shows how the promoters treat its shareholders and whenever they get opportunity they try to en cash it through their holding Companies.

My conclusion : Corporate governance is pathetic and also with the Power venture fiasco the company is a very poor Capital allocator and also very poor in execution.
Personal interest of promoters is given preference over creating value for shareholders. Sharing of profits with share holders is not evident , the Company has declared dividend of only Rs 1 against EPS of Rs 112 for FY 2019-20… Also it has written off all its investment in Jindal Power Tech and saddled Banks with NPA of more than 7000 Crs.
The promoters should be held responsible for their decisions.

Disclosure : Just tracking Company for investment looking to the Cyclical up move but now the Company is a real no go for me.

JPF Netherland BV 2017.pdf (1.7 MB)

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