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JSW Steel to Acquire Welspun Maxsteel Ltd.
08/18/2014 - JSW Steel Limited has entered into a definitive agreement with Welspun Enterprises Ltd. (WEL) to acquire WEL’s shares in Welspun Maxsteel Ltd. (WMSL) for an enterprise value of Rs 1000 crores plus net current assets as of 31 August 2014, subject to regulatory approvals and customary closing conditions.
JSW is a major player in the Indian steel industry with an installed capacity of 14.3 million metric tons per annum (MTPA). It has a strategic goal to enhance its steel production to 40 MTPA over the next decade. WMSL is situated in close proximity to JSW’s Dolvi unit, offering complimentary infrastructure and location to augment the current envisaged expansions at Dolvi.
Seshagiri Rao, managing director and CFO of JSW Steel, said, “This acquisition is value accretive to JSW Steel due to synergies in supplying surplus pellets to Welspun MaxSteel and use of DRI from WMSL in company’s steelmaking operations at Dolvi plant.”
WMSL has a 0.9 MTPA gas-based DRI plant, with a captive jetty and a captive railway siding. The DRI plant is located in the Salav village in Raigad district of Maharashtra. The captive jetty has an existing capacity of 2.5 MTPA and is located 1.8 km from the plant, while the captive railway siding is located at Roha junction on national Konkan Railway, 35 km from the DRI plant. WMSL also has vacant land of approximately 480 acres, available for future expansions.
The company has surplus pellets in its subsidiary Amba River Coke Limited which will be supplied to WMSL. The cost of production in WMSL is expected to come down due to replacement of significant portion of its bought-out pellets with captive pellets. The DRI produced by WMSL shall initially be used partly by the company’s Dolvi unit, and would be consumed in the entirety post completion of its ongoing expansion to 5 MTPA.
Ernst & Young and Luthra & Luthra carried out financial and legal due diligence respectively for the JSW.
Seshagiri Rao, managing director and CFO of JSW Steel, said, “This acquisition is value accretive to JSW Steel due to synergies in supplying surplus pellets to Welspun MaxSteel and use of DRI from WMSL in company’s steelmaking operations at Dolvi plant.”
WMSL has a 0.9 MTPA gas-based DRI plant, with a captive jetty and a captive railway siding. The DRI plant is located in the Salav village in Raigad district of Maharashtra. The captive jetty has an existing capacity of 2.5 MTPA and is located 1.8 km from the plant, while the captive railway siding is located at Roha junction on national Konkan Railway, 35 km from the DRI plant. WMSL also has vacant land of approximately 480 acres, available for future expansions.
The company has surplus pellets in its subsidiary Amba River Coke Limited which will be supplied to WMSL. The cost of production in WMSL is expected to come down due to replacement of significant portion of its bought-out pellets with captive pellets. The DRI produced by WMSL shall initially be used partly by the company’s Dolvi unit, and would be consumed in the entirety post completion of its ongoing expansion to 5 MTPA.
Ernst & Young and Luthra & Luthra carried out financial and legal due diligence respectively for the JSW.
