CFM ARC sells JBF Industries assets to Reliance Industries entity

Ahmedabad-based CFM Asset Reconstruction Company has sold the secured assets of JBF Industries, a polyester manufacturer, by way of private treaty under the Sarfaesi Act (the Securitisation and Reconstruction of Financial Assets and enforcement of security interest act) to an entity owned by Reliance Industries.

RIL was the lone bidder for the company with a Rs 825-crore offer as against the dues of Rs 2,100 crore of banks. For Reliance, acquiring JBF Industries assets makes sense as the company is engaged in the production of polyester products, including bottle grade plastic chips, textile-grade polyester yarn, and polyester filament yarn, etc.

RIL did not comment on the acquisition. JBF confirmed that its secured assets have been sold by CFM Assets, which had acquired the loans for its lenders.

A separate process to sell JBF Petrochemicals, a subsidiary of JBF Industries with a manufacturing plant in Mangaluru in Karnataka, is going on under the Insolvency and Bankruptcy Code, 2016, after the company defaulted on loans worth Rs 5,000 crore. The company, in which global private equity giant KKR & Co has an exposure of Rs 1,000 crore, was admitted by the National Company Law Tribunal (NCLT) for debt resolution in January this year.

KKR, which had acquired a 20 per cent stake in JBF Industries, was leading the sale process, but one of the lenders moved the NCLT, Ahmedabad, for debt resolution of JPL. The parent company has been declared a wilful defaulter by one of its lenders. The auditors of the company have warned of the existence of material uncertainty that may cast significant doubt about the company’s ability to continue as a going concern.

JBF Industries was set up in 1982 as a yarn texturising company and later started a backward integration and expanded capacities in the polyester value chain. Fuelled by debt, JBF increased its capacity and emerged among the top-10 producers of polyethylene terephthalate chips and Biaxially-Oriented Polyethylene Terephthalate films globally. 

On a standalone basis, JBF is predominantly a polyester chips player (textile grade and bottle grade) having capacity of 608 KT pa and polyester yarn capacity of 352 KT pa. Having established itself in the domestic market, JBF entered the overseas markets in 2008 by setting up a PET chips and BOPET films plant in Ras AL Khaimah, UAE. The UAE company is also facing bankruptcy.

In 2014, it commissioned a BOPET films plant with capacity of 90 Kt pa plant at Bahrain and bottle grade PET chips plant with a capacity of 390 KT per annum at Geel, Belgium. But by 2017, it started facing headwinds due to cash flow mismatches mainly due to losses in its overseas operations even as its debt shot up. In August 2018, KKR announced that it will buy a stake in JPL but the deal fell through.