The Sajjan Jindal-controlled Jindal Iron and Steel Company and its subsidiary, Jindal Vijaynagar Steel, are planning to consolidate their businesses to create a Rs 4,000 crore (Rs 40 billion) plus entity.
As per the plan, the parent, Jisco, will be merged into JVSL in a reverse merger. The boards of the two companies are meeting tomorrow to approve the recast plan.
| Steel recast |
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Merger to create a Rs 4,000 crore-plus entity As per the plan, the parent, Jisco, will be merged into JVSL in a reverse merger The group has been toying with the idea of a reverse merger for quite some time, but the plan was delayed due to tax issues |
The group has been toying with the idea of a reverse merger of Jisco into JVSL for quite some time, but the plan was delayed due to tax issues.
The recast will create an integrated steel company with products ranging from iron ore to hot-rolled coils and value-added galvanised products.
"The operations as well as the financial assets of the two companies will be merged to form one entity," a source in the Jindal group said.
Tuesday's board meeting will also finalise an external financial consultant to evaluate the restructuring proposal.
Though Jisco's profits in 2002-03 were wiped out by JVSL's losses, the latter has turned around in the current financial year.
JVSL was formed through leveraging of the financial assets of Jisco. Jisco holds about 20 per cent in JVSL. The companies together have a debt of over Rs 6,000 crore (Rs 60 billion).
Jisco currently has a cold roll and galvanising capacity of around 5 million tonnes per annum. While Jisco has a cold-rolling mill at Tarapur, its galvanising facilities are at Vasind, both in Maharashtra. JVSL has a 2 million tonne hot-rolling plant at Bellary, Karnataka.
The merged entity will not only witness a consolidation in manufacturing, but also across its financial and marketing divisions.
"I cannot disclose the details of this development because the board will take a decision on it tomorrow," a senior Jisco executive said.
"In order to reduce the additional costs of operating two companies in the same business, the group has considered the option of consolidating the two," he pointed out.
