JSW Steel, led by Sajjan Jindal, has proposed to merge its subsidiaries JSW Ispat Special Products (formerly Monnet Ispat & Energy) and holding company Creixent Special Steels into itself.
JSW Steel, along with AION Investments Private-II through CSSL, acquired JISPL for ₹2,457 crore in 2018.
Following the merger, JSW Steel will issue one share of its own capital for every 21 shares of JISPL held by common and preferred shareholders. Similarly, it will issue three shares for every two CSSL shares held by shareholders (other than JSW Steel). The merger is expected to be finalized in 12 months, subject to required approvals.
After the merger, JSW Steel’s promoter stake will drop from 45% to 44.5%, while Japanese JFE Steel’s will drop to 14.8% (15%) and ordinary shareholders’ stake will drop to 39.5% (40 %). JISPL and AION Investment will own 0.4% and 0.7% of JSW Steel respectively. JISPL’s EBITDA increased several fold to ₹472 crore in FY22 from ₹39 crore recorded in FY18.
Seshagiri Rao, Co-General Manager of JSW Steel, said the merger will not only improve efficiency but also stakeholder value by unlocking intrinsic value and growth potential.
“When we acquired Monnet Ispat & Energy as a struggling entity with AION as our partner, the objective was to turn the business around and turn it into a fully-fledged sustainable business before merging it with JSW Steel. Now that the business is profitable and thriving, we believe it is the right time to integrate it into JSW Steel and leverage the synergistic benefits of the combined entity,” he added.
JISPL is a manufacturer of specialty steel products, serving the seamless pipe, automotive and high-speed rail industries. It has a crude steel production capacity of 1.2 Mtpa at its integrated Raigarh and Raipur steelworks in Chhattisgarh.
In accordance with the merger, JISPL will be able to source iron ore from JSW Steel’s captive iron ore mines near its plant, resulting in a reduction in the overall cost of supply. On the other hand, JSW Steel can source coke from JISPL.
Additionally, JSW Steel will increase its presence in Central India and provide opportunities to access new markets, segments, product offerings and customers. The planned commissioning of a second electric arc furnace in the September quarter will increase JISPL’s crude steel production and the slabs produced by it can be rolled into sheets at JSW Steel’s factories in Vijayanagar and ‘Anjar, which have excess rolling capacity.
May 27, 2022