Jindal Iron may opt for vertical split

The Sajjan Jindal controlled Jindal Iron & Steel Company is likely to be split into two.

The company is planning a vertical split -- one company will focus on the core activity of being a steel producer, while the other will hold its investment portfolio.

The investment company is then likely to be listed on the bourses. JISCO has appointed RSM & Company to evaluate the proposal.

JISCO has informed the Bombay Stock Exchange that its board on Thursday approved in principle the restructuring of the company.

An executive at JISCO told Business Standard: "We are yet to take a final decision on the restructuring of the company. The company's investments have proved to be a drag on its overall performance. The idea is to enhance shareholder value and to ensure that the bottomline of the company is not impacted by the company's investment portfolio."

"RSM & Company will be designing the fine print of the restructuring proposal and will map the restructuring route," company sources said.

The idea behind the spilt appears to be to insulate JISCO from its exposure to other group companies, primarily Jindal Vijaynagar Steel.

JISCO is a leading galvanised and value-added steel producer that has turned around. On the other hand, although Jindal Vijaynagar Steel has cut its losses, it is yet to return to the black.

The total investment of the company as on March 31, 2002, stood at Rs 587.16 crore (Rs 5.871 billion).

A major portion of its investments is in Jindal group companies, primarily Jindal Vijaynagar Steel. Company executives said currently JISCO's loan to Jindal Vijaynagar Steel was around Rs 500 crore (Rs 5 billion).

Besides Jindal Vijaynagar Steel, JISCO has investments in group and subsidiary companies like Jindal Coated Steel, Jindal Pte, Sun Investments, Jindal Strips, Jindal Steel & Power and Jindal Tractable.

Future course

• After the split, one company will focus on the core activity of being a steel producer, while the other will hold the investment portfolio.
• The investment company is likely to be listed on the bourses.