Industrialist Naveen Jindal-led Jindal Steel & Power (JSPL) received shareholders’ approval to divest its 96.42% stake in its subsidiary Jindal Power (JPL) for Rs 7,401 crore to Worldone (WPL). The resolution was approved by 97.12% of the total votes at the company’s EGM on Friday, JSPL said in a BSE filing.
Of the total Rs 7,401 crore, Worldone, a company owned by the Jindal family, will pay Rs 3,015 crore in cash and takeover liabilities worth Rs 4,386 crore of inter-corporate deposits (ICDs) and the capital advances paid by JPL to JSPL, it said. The deal will help JSPL reduce debt of Rs 6,566.44 crore (as of December 31, 2020), and help it become a net cash firm.
In May, JSPL had sought shareholders’ approval to divest the stake in JPL for Rs 3,015 crore in a cash deal. According to the deal, ICDs and capital advances of Rs 4,386 crore given to JSPL by JPL were to be converted into loans, while JSPL would continue to hold the redeemable preference shares (RPS). JPL has issued about 290-crore 20-year RPS and about 390 crore 5% cumulative RPS to JSPL.
However, an EGM called to seek shareholders’ approvals was cancelled on May 21, a day before the meeting, due to investor concerns. Later, JSPL revised the offer, in which WPL would take over ICDs and capital advances of Rs 4,386 crore.
Earlier, proxy advisory firms such as Institutional Investor Advisory Services India (IiAS) and Stakeholders Empowerment Services (SES) had asked shareholders to vote against the proposal, citing various irregularities. IiAS alleged that the audit committee that approved the transaction “lacked independence” and the revised offer was also not “better” than the earlier one. This was because the equity value remained same at Rs 3,015 crore, while preference shares are being offset against the ICDs and capital advances.
On its part, SES said that there would be a loss of Rs 2,400 crore for investors due to RPS being sold for Rs 4,386 crore. With the stake sale to reduce debt, why should the firm look at divesting coal facilities, it asked. In May, InGovern had also asked to reject the proposal, but later with the revised deal, it recommended shareholders vote for the transaction.