Dhanukas team up with Indian friend Indorama Ventures to revive Egyptian JV
In a stock exchange filing, the company said Dhunseri Petrochem and Indorama Ventures entered into a share purchase agreement for the same on June 14, 2018.
In a stock exchange filing, the company said Dhunseri Petrochem and Indorama Ventures entered into a share purchase agreement for the same on June 14, 2018. The deal was clinched for “a token amount" for various reasons - the company’s negative net worth, the cordial business relationship between the two partners and assured feedstock supply by Indorama Ventures, those familiar with the development said.
“The transaction takes place with immediate effect. Initiatives to restart manufacture of recyclable PET is all set to commence. Key raw material PTA will be shipped from Indorama's Portugal unit from July 2018," the filing stated.
Dhunseri Petrochem currently holds 70% in its wholly owned subsidiary EIPET. The company's holding in the Egyptian business will increase to 93 % once it completes acquiring its partner Egyptian Petrochemicals Holding Company (ECHEM) 23% stake. Talks are on to acquire the balance 7 % stake from the second JV partner, Engineering for the Petroleum & Process Industries.
When contacted, Dhunseri Group executive chairman C K Dhanuka said: "As per the share purchase agreement, Indorama Ventures will be an equal shareholder in the ratio of 1:1 through a combination of sale of shares of EIPET held by Dhunseri Petrochem and those that the latter will acquire in tranches from ECHEM."
Dhunseri's India business of polyethylene terephthalate (PET) resin, which finds most use in lightweight plastic bottles for soft drinks and water, is an equal joint venture with Indorama Ventures. The loss-making Egypt subsidiary was not part of the deal at the time.
Located in the north west of the Gulf of Suez, the Egyptian venture has a manufacturing capacity of 5,40,000 tonnes per annum. The replacement cost of the plant is $225 million. Dhunseri Petrochem had invested $40 million in 2013 to set up the plant. The Egyptian subsidiary cumulatively owed $197 million to the lenders.
Last month, the Dhanukas entered into back-to-back deal with Egyptian ventures equity shareholders and banks to scale up their holding and make it debt free. EIPET paid $87 million to Commercial International Bank (Egypt), Ahli United Bank, Egypt, Ahli United Bank B.S.C. and International Finance Corporation to clear its dues. The payment was funded by a mix of internal accruals of $30 million and a short term bridge finance from ICICI Bank.
Elaborating on the ICICI Bank loan, Dhanuka said, Dhunseri Petrochem intends to repay the loan within a short span of two months. "While Indorama Ventures will infuse $ 25 million into EIPET, the Egyptian firm will mop up $ 50 million from the local debt market. Following this, EIPET will have $75 million in its balance sheet. Of this, EIPET plans to return $62 million to Dhunseri Petrochem to clear ICICI Bank dues. Balance sum of $ 13 million will be used as working capital by EIPET," the chairman of Dhunseri Petrochem said.