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Shares of Jain Irrigation Systems rose as much as 17 percent in an otherwise weak market on Wednesday as investors cheered the firm's international irrigation business merger with Rivulus, part of Singapore-based investment fund Temasek.

The combined entity will have $750 million in revenues if all approvals come in, creating the world's second-biggest irrigation player.

Jain Irrigation's stock soared about 20 percent on Tuesday. The stock has been gaining for the last two days and has surged over 34 percent during the period.

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The board/sub-committee met virtually and took on record the decision by the wholly-owned subsidiary, JITBV, to merge its international irrigation business with Rivulis, the company said in an exchange filing after market hours on Tuesday. "The company has agreed to sign two agreements with the merged company as follows at or before closing: a) license and supply agreement; and b) trade mark license agreement," the filing stated.

The company said that the cash proceeds from the merger would be utilised for the reduction of consolidated debt of Jain Irrigation by around 45 percent, which includes all the restructured overseas bonds to the tune of about $225 million and complete debt of overseas operating companies comprising international irrigation business.

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"In terms of our 22 percent stake, we intend to retain and grow with the company. It is already a more than billion-dollar size company. In the next few years, this could get globally listed, and it would have more legs to continue to grow. And we're going to continue to sell more out of India as well," said Anil Jain, Vice-Chairman & Managing Director at Jain Irrigation Systems.

"We plan to grow based on cash flow and free cash flow generation. So, the idea is that between now and 2025, we should significantly deleverage the Indian balance sheet while continuing to grow as the unique company involved in the complete agri value chain," Jain said.

The transaction is subject to required regulatory approvals and other customary closing conditions and is expected to be completed by early 2023.

Goldman Sachs acted as the financial advisor, Baker McKenzie acted as the legal advisor, and PWC acted as tax and diligence advisor to JITBV for the transaction.

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First Published:Jun 22, 2022 10:14 AM IST