Tamil Nadu-based Sheenlac Paints is eyeing to take full control of its joint-venture (JV) with Jenson & Nicholson India Ltd (JNIL) even as the latter faces the insolvency resolution process under the National Company Law Tribunal (NCLT).
In February last year, Sheenlac Paints entered into a JV agreement with JNIL whereby the rights over the J&N brand was transferred to this JV entity — Jenson & Nicholson Paints Pvt Ltd (JNPPL). It was agreed that although Sheenlac Paints would have a 49 per cent minority stake in this company, the entire managerial and operational control lay with Sheenlac. The rest of the stake in JNPPL remained with JNIL.
However, in August 2017, Vivid Colors Pvt Ltd, a financial creditor, submitted a petition in NCLT against JNIL that was admitted and is up for the requisite insolvency resolution process. The total debt of JNIL is to the tune of Rs. 2.95 billion.
JNPPL, the subsidiary company, however, has been left out of the ambit of the NCLT as it didn’t take up any of JNIL’s debt burden.
Although the State Bank of India (SBI), Union Bank of India, Bank of Baroda, Bank of India, SBI Home Finance, SIDBI, Canara Bank, Allahabad Bank, National Co-operative Bank, Standard Chartered Bank and Global Trust Bank are the original lenders to JNIL, they had assigned the entire loan portfolio to Vivid Colors Pvt Ltd, effectively making this company the current sole lender.
The committee of creditors, along with the resolution professional Vinay Talwar, will be meeting in New Delhi on January 8 to discuss the expression of interest.
Although Sheenlac Paints had originally targeted to gradually acquire the brand as well as a majority stake in JNPPL in a five-year timeframe, it is now rushing to take control of this JV entity.
Sources in the company told Business Standard that Sheenlac Paints will be appointing an external auditor to work out the valuation of JNPPL and, accordingly, Sheenlac Paints will quote their offer of a takeover.
"That is how the J&N brand is expected to live on," a person aware of these developments said.
While Sheenlac Paints acquired the managerial rights during formation of this JV, it didn’t opt for the takeover of any physical assets.
Officials in the paint industry are of the view that while J&N's brand recall has diminished a lot over the years, it can still stage a comeback given a fresh start. Some are also of the view that given JNIL's debt burden, the company only had the J&N brand as its asset, which it transferred to the JV.
The Tamil Nadu-based company is not keen to bid for assets of JNIL. Instead, it wants to opt for contractual third-party manufacturing of the J&N brand.
During the formation of the JV, Sheenlac Paints CEO Sridhar Krishnamoorthy had indicated that the J&N brand is worth in excess of Rs 1 billion and he is eyeing at least Rs 3.5 billion revenue from this venture during 2017-2022.