Jain Irrigation to merge global biz Temasek-owned Rivulis; stock zooms 17%

Going forward Jain Irrigation Systems will focus on improving the India business to drive higher growth and margin in one of the fastest growing irrigation markets in the world

Shares of Jain Irrigation Systems (JISL) surged 17 per cent to Rs 43.90 on the BSE in Wednesday’s otherwise weak market, amid heavy volumes. The spurt comes after the company said it will merge its International Irrigation Business (IIB) with Temasek-owned Rivulis Pte Ltd to cut consolidated debt. The cash proceeds will be used to pay off Rs 2,700 crore of overseas debt.

In the past two trading days, the stock has zoomed 40 per cent from a level of Rs 31.25 on Monday. At 09:29 AM, it was trading 14 per cent higher at Rs 42.75, as compared to 0.94 per cent decline in the S&P BSE Sensex. Trading volumes on the counter jumped over four-fold with a combined 1.8 million shares having changed hands on the NSE and BSE.

Jain International Trading B.V., a wholly owned subsidiary of Jain Irrigation, and Rivulis (part of Singapore based Temasek group) have entered into definitive transaction agreements.

"This transaction, once closed, will result into substantial reduction in the Company's consolidated debt approximately by 45 per cent (Rs 2,700 crore) and reduce the interest cost. This will enable the Company to refocus its efforts to grow business in India, while further deleveraging the Standalone India balance sheet," JISL said in a press release. READ HERE

Jain International Business will continue to hold stake of around 22 per cent in the merged entity with Temasek holding the balance around 78 per cent. JISL will also get to release its corporate guarantee given by Jain Irrigation India of Rs 2,275 crore to bondholders & IIB lenders, the company said.

JISL will have a long-term supply agreement with the merged entity, which would drive revenues and profits, it added.

Going forward JISL will focus on further improving the India business to drive higher growth and margin in one of the fastest growing irrigation markets in the world, and eventually aim to reduce debt on the standalone Indian business balance sheet as well – as agreed with the lenders in the recent restructuring, the company said.

JISL, its subsidiaries and associates, are engaged in providing solutions in agriculture, water and food sector through manufacturing of Micro Irrigation Systems, PVC Pipes, HDPE Pipes, Plastic Sheets, Agro Processed Products, Renewable Energy Solutions, Tissue Culture Plants, Financial Services, and other agricultural inputs.

Tech view

Target: Rs 47

Support: Rs 37

Jain Irrigation's stock is testing its immediate resistance of Rs 41 -- the higher end of the Bollinger Band -- as per the daily chart. Sustennance of this level can push it towards the next immediate target of Rs 47, as per weekly charts. Beyond that, Rs 51 could be the target, as per the monthly charts.

On the downside, support levels are in the range of Rs 37-Rs 40, as per the daily charts. 

The stock's moving average-to-price ratio, however, is negative as its 20-day moving average (20-DMA) of Rs 36.6 is below the 50-DMA of Rs 38.5. Similarly, 50-DMA is below 100-DMA (Rs 39.85). The 100-DMA, too, is below the 200-DMA (Rs 40.85).

Meanwhile, the momentum oscillators suggest the next leg of rally would be relatively slow.

(With inputs from Nikita Vashisht)