India’s 3rd largest steelmaker, JSW Steel to acquire INR 10 billion Welspun Maxsteel to source cheaper raw material, reduce production cost and fortify its presence in West market.
JSW Steel is planning to purchase Welspun Maxsteel for around INR 10 billion plus net current assets as of an agreed date of 31 Aug, 2014 subject to the relevant regulatory approvals and customary closing conditions. This acquisition will help the company to source raw material at cheaper rates as well as reduce production costs and strengthen company’s presence in West market, as the company’s buying of finished steel may halt from the North market.
JSW will supply extra Pellets from its subsidiary Amba River Coke to Welspun’s DRI plant, which will ultimately reduce costing of the latter as buying from outside sources, will reduce.
It is in news that the company will purchase the Sponge plant, almost 1,000 acres of land, known in industry parlance as a slump sale and jetty, besides absorbing INR 10.3 billion debt of Welspun Maxsteel. Assets are not valued individually in a slump sale, but as a whole.
JSW Ispat that owns a 3 MnT Steel plant at Dolvi in Maharashtra purchases Sponge iron from the nearby Welspun Maxsteel plant, to produce high grade steel. This acquisition will help the company to secure a continuous supply of cheaper Sponge iron as it plans to expand its Dolvi capacity to 5 MnT. The company also planning to supply Pellets as it uses only 3 MnT, while it has 4 MnT capacity.
JSW Steel’s production at its 10 MnT plant at Vijayanagar in Karnataka has been hit by dearth of Iron ore on the backdrop of series of mining embargoes. The steelmaker is to expand its capacity in Dolvi to supply in West market.