Jain Irrigation Systems Ltd. reached the highest level in a week after the second-biggest maker of farm equipment said it will seek funds from private equity firms and institutions for a unit that will give loans to farmers.
The shares surged as much as 11 percent to 196.60 rupees and traded 8.2 percent higher at 192.30 rupees at 12:04 p.m. in Mumbai. The stock is the top performer on the BSE-200 index.
Jain plans to sell a 30 percent stake in the unit to the investors, Managing Director Anil Jain said in Mumbai yesterday. Founders will own 20 percent and the balance will be held by Jain Irrigation, he said. The proposal, first announced on Jan. 28 together with a 7 billion-rupee ($153 million) equity sale, sparked a sell-off that ended with shares slumping the most in more than 12 years on Feb. 1.
“The recovery in the stock is because the management has clarified the whole business plan,” said Sageraj Bariya, an analyst at Angel Broking Ltd., who has a “neutral” rating on the shares. “The stock is coming back to its fair valuation.”
The lending business will require a 1 billion rupee ($22 million) investment over two years that should pare receivables by 10 billion rupees from 13 billion rupees, Jain said.
The funds from the share sale will help the company lower debt, reduce its interest burden and borrow new funds at a lower cost, he said. Net debt was 21 billion rupees as of Dec. 31 is expected to fall to 15 billion rupees after the sale, Jain said.