Sajjan Jindal-led JSW Steel has proposed to merge its subsidiaries JSW Ispat Special Products (formerly Monnet Ispat & Energy) and the holding company Creixent Special Steels with 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 equity share of itself for every 21 shares of JISPL held by common and preferential shareholders. Similarly, it will issue three shares for every two shares of CSSL held by shareholders (other than JSW Steel). The merger is expected to be completed in 12 months, subject to requisite approvals.
Post merger, JSW Steel promoters’ shareholding will come down to 44.5 per cent from 45 per cent, while that of Japan’s JFE Steel will dip to 14.8 per cent (15 per cent) and common shareholders’ 39.5 per cent (40 per cent). JISPL and AION Investment will hold 0.4 per cent and 0.7 per cent in JSW Steel, respectively. JISPL’s EBITDA has gone up multi-fold to ₹472 crore in FY22 from ₹39 crore logged in FY18.
Seshagiri Rao, Joint Managing Director, JSW Steel, said the merger will not only improve efficiency but also enhance stakeholders’ value by unlocking the intrinsic value and growth potential.
“When we acquired Monnet Ispat & Energy as a distressed entity with AION as our partner, the aim was to turn around the company and make it a sustainable business on its own before merging it with JSW Steel. Now that the company is profitable and thriving, we believe this is the right time to bring it into the JSW Steel fold and leverage the synergistic benefits of the combined entity,” he added.
JISPL is a special steel products manufacturer, catering to the seamless pipe, automobile, and high-speed rail industries. It has a crude steel production capacity of 1.2 mtpa at its integrated steel plants in Raigarh and Raipur in Chhattisgarh.
Operation efficiency
Pursuant to the merger, JISPL will be able to source iron ore from the captive iron ore mines of JSW Steel that are close to its plant, leading to reduction in overall cost of procurement. On the other hand, JSW Steel can source coke from JISPL.
Moreover, JSW Steel will increase its presence in central India and provide opportunities to access new markets, segments, product offerings and customers. The expected commissioning of a second electric arc furnace in the September quarter will increase the crude steel production of JISPL and the slabs produced by it can be rolled into sheets at JSW Steel plants at Vijayanagar and Anjar, which have surplus rolling capacity.