Canadian investment firm Brookfield Asset Management Inc, on Thursday said it has signed an agreement to pick up a minority stake in the packaging films business from Jindal Poly Films Limited (JPFL) for Rs 2,000 crore (around $263 million).
This is among the largest private equity deals in India’s packaging sector, which has seen significant interest from foreign investors including the Blackstone, Warburg Pincus and Advent International, and domestic investors such as JM Financial PE and Premji Invest over the past few years.
Brookfield’s Special Investments program BSI along with institutional partners, will buy a 25% stake in a new unit that Jindal Poly Films will carve out to house its packaging films business, which generates approximately 85% of its total revenue, Brookfield said in a statement.
Mumbai-listed Jindal Poly will retain 75% ownership of the new unit, to be called JPFL Films Pvt Ltd. It will also continue to own its non-woven business unit and other corporate assets.
"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,” said Dev Santani, Managing Director of BSI.
Brookfield’s structured equity investment in JPFL comprises compulsory convertible preference shares (CCPS) and new subsidiary equity shares, giving BSI a downside protection through a ratcheted equity structure connected to financial performance. In addition, BSI has signed an investor rights agreement.
The transaction which is subject to customary approvals is expected to close during the first half of the fiscal year 2023.
JPFL will be able to accelerate its diversification into new companies as a result of this strategic investment, while also enhancing profitability and growth possibilities for its packaging business unit. the company is into manufacturing flexible plastic films and non-woven fabrics products. It offers products in specialised films through its single location plant in Nashik, Maharashtra. Its products are used for food and cosmetics, labels, among other segments.
The packaging films business generated Rs 3,473 crore in revenue for the year through March 2021.
Brookfield has been operating in India for over 11 years and currently manages $20.6 billion in assets across infrastructure, real estate, and renewable energy.
Its investment in Jindal Poly comes at a time when the packaging business has witnessed significant M&A activity.
In November, Warburg Pincus-backed Parksons Packaging Ltd acquired folding carton manufacturer Manohar Packaging and around a year ago, homegrown JM Financial PE had invested Rs 60 crore ($8.3 million) in Gujarat-based Canpac Trends Pvt Ltd.
Last year in August 2021, Manjushree Technopak said it will a majority stake in Classy Kontainers while Premji Invest, - the family office of Wipro’s Azim Premji - bought a significant stake in Delhi-based SB Packagings.
In one of the largest buyouts in the Indian packaging industry, US-based Blackstone had acquired Piramal Glass at an enterprise value of $1 billion in December 2020 and Essel Propack for $470 million in 2019.
In 2018 Advent International gave an exit to Kedaara Capital and bought a controlling position in plastics packaging material maker Manjushree Technopak in 2018. The company has since added Pearl Polymers and National Plastics to its portfolio.
