Jaykay Enterprises signed a loan agreement of up to Rs 100 crore with its subsidiary JK Defence & Aerospace to fund its defence business.

In simple terms, the parent company is lending money to its own child company. JK Defence & Aerospace Limited is fully owned by Jaykay Enterprises Limited (JKE), so the cash stays inside the group.

The agreement was signed on 8 October. JKE will release the money in one or more instalments instead of a single payout, and the funds are meant for the subsidiary’s work in the defence and aerospace sector.

The loan runs for three years and carries interest of 10% a year. It is unsecured, so JK Defence has pledged no assets against it, and the two companies will settle repayment terms between themselves.

JKE told exchanges that the deal is on an arm’s length basis, which means it is priced as if two unrelated firms had agreed it.

Since the borrower is a subsidiary, the deal still counts as a related-party transaction, but the company said it found no conflict of interest and that no nominee directors will join the board because of it.

No shares are being issued. JKE also said it had not lent anything to JK Defence before this agreement. The loan follows a quick run of funding moves.

On 5 October, JKE bought 25 lakh preference shares in JK Defence for Rs 25 crore, using money from its recent rights issue.

That issue raised about Rs 154 crore and drew bids worth 189% of the shares on offer.

JK Defence was set up in July 2023 and has yet to start business, so it has reported no turnover.

Its registered office is in New Delhi. Defence work is building up elsewhere in the group.

In August, Allen Reinforced Plastics, which sits further down the Jaykay group, won a Rs 60.01 crore work order from BrahMos Aerospace for composite parts. The company has put the full loan details on its website.

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