JSW Ispat is to be merged with JSW Steel, the boards of directors of the steel major decided on Saturday. The Steel-Ispat merger is in the ratio of 1:72, a share of JSW Steel for 72 shares of JSW Ispat.
“This gives us opportunity to do brownfield expansion in Vijaynagar and dolvi Maharashtra plant Vijaynagar will concentrate on southern part of India,” said Sajjan Jindal, chairman and managing director of JSW Steel.
Post the merger, Japan's JFE Steel's stake in JSW Steel is down to 14.92%. "They have the approval to bring in more cash and take their stake back to 15 per cent," said Sajjan Jindal.
The merger will also make JSW second largest domestic steel producer, with a 14.3 million tonnes per annum production capacity, after state-owned Steel Authority of India (SAIL).
In December, 2010, the Sajjan Jindal-led firm had acquired 41 per cent stake in debt-ridden Ispat Industries for about Rs. 2,157 crore from its then promoters Pramod and Vinod Mittal and subsequently renamed it as JSW Ispat Steel. It also refinanced its Rs. 6,000 crore debt, out of a total of Rs. 9,500 crore debt at the time of acquisition, to bring it out of corporate debt restructuring. It has now narrowed its net loss to Rs 263.64 crore in FY2011-12 from Rs 1,872.29 cr in the previous year.
According to Seshagiri Rao, joint managing director and group CFO, the merger will bring down interest cost of JSW Ispat by Rs 250 cr. “Jsw Ispat is loss making, so it is paying 3.66% more interest on loans,” he said.
As on June 30, JSW Steel has 46.75 per cent stake in JSW Ispat, while the erstwhile promoters, Pramod and Vinod Mittal hold less than 20 per cent stake.
JSW Ispat, which runs a 3.2 million tonnes production capacity at Dolvi, near Mumbai, posted a net profit of Rs. 478.24 crore during the April-June quarter, its first profitable quarter in last few years.
The company, while announcing the results for the last quarter, had said that its net deferred tax asset, as on June 30, stands at Rs.2,087.94 crore and it is confident of claiming it in future, when it will have sufficient taxable income.
With inputs from Press Trust of India
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