Dhanuka-Lohia JV travels to Egypt – Dhunseri Petrochem Ltd has signed a definitive agreement with Thailand’s Indorama Ventures (IVL) to sell a 35 per cent stake in its Egyptian PET resin business, capping a series of recent transactions to restart the mothballed plant – Dhanuka Lohia JV EIPET Egypt - Arhive
Dhanuka Lohia JV EIPET Egypt Dhanuka Lohia JV EIPET Egypt Dhanuka Lohia JV EIPET Egypt Dhanuka Lohia JV EIPET Egypt Dhanuka Lohia JV EIPET Egypt Dhanuka Lohia JV EIPET Egypt Dhanuka Lohia JV EIPET Egypt Dhanuka Lohia JV EIPET Egypt Dhanuka Lohia JV EIPET Egypt
Dhanuka-Lohia JV travels to Egypt
Calcutta: Dhunseri Petrochem Ltd has signed a definitive agreement with Thailand’s Indorama Ventures (IVL) to sell a 35 per cent stake in its Egyptian PET resin business, capping a series of recent transactions to restart the mothballed plant.
The two companies, who are already equal partners operating Indian businesses, including a similar plant at Haldia in Bengal, will eventually hold 50 per cent each in EIPET (Egyptian Indian Polyester Company SAE).
Indorama, promoted by Indian-born billionaire Alok Lohia, will immediately pump $25 million into EIPET, which plans to start production by the middle of August.
Indorama’s investment will match a similar amount already put in by Dhunseri, promoted by Calcutta-based Chandra Kumar Dhanuka.
Located in the Ain Sukhna free trade zone, north-west of the Gulf of Suez in Egypt, the plant is capable of producing 540,000 tonnes of PET resin which finds use in the manufacturing of plastic packaging products.
The key raw material for the plant, PTA, will be shipped from IVL Portugal, thereby saving a significant amount in logistics cost.
Dhanuka said the business should generate at least $20 million EBIDTA in 2019, the first full year of commercial operations after restart.
Aloke Lohia, the group CEO of IVL, which earned $8.4 billion in revenue in 2017, said: “I’m delighted to extend our strategic partnership with Dhunseri through this acquisition. EIPET is a good fit with Indorama Ventures…It also marks Indorama Ventures’ maiden entry into Egypt.”
Dhanuka pointed out that the Indian JV is operating “extremely smoothly”.
“We are very upbeat on entering the same in Egypt, which will be again an equal ownership JV,” he added.
The joint venture with Indorama culminates a series of back-to-back deals Dhanuka made to resolve the Egyptian puzzle which was draining the consolidated balance sheet of listed Dhunseri Petrochem because of sustained losses. The plant was closed for two years because of financial woes.
On May 21, it reached an agreement to buy out a 23 per cent stake from the local partner in phases.
Dhunseri, which had a 70 per cent stake before the transaction, will eventually buy the residual 7 per cent from another local company.
Four days later, it reached a final settlement with a clutch of overseas lenders by paying them $87 million. The lenders cumulatively had an exposure of $197 million.
While $25 million went from Dhunseri, the rest $62 million was arranged as a bridge loan from ICICI Bank.
EIPET will now raise $50 million fresh debt on its balance sheet and use $25 million that Lohia’s IVL plans to inject to pay off ICICI Bank.
Consequently, EIPET will initially have $13 million as working capital on the books.
While Lohia will pay a token consideration of $1 million for the 35 per cent stake, half of what Dhunseri owns at present, IVL will share the cost of acquisition from the overseas partner equally.
As the Egyptian partners, who are government entities, are exiting at the par value of shares ($100 share a piece), the cost of their shares would be $17 million. With IVL now coming on board, it plans to pick up the tab equally with Dhunseri and eventually become 50:50 partners, just like the Indian business.
Dhunseri shares closed at Rs 125 on the BSE, up Rs 5.70, or 4.78 per cent, even as the benchmark index closed flat (up by a meagre 0.06 per cent).
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