With the acquisition, Welspun could enjoy the synergy benefit by combining its sponge iron manufacturing operations at Anjar in Gujarat.
The sponge iron business of Vikram Ispat had a sale turnover of Rs 950 crore in the last fiscal. The transaction is expected to be completed within the next six months.
After the board meeting on Tuesday, Grasim announced that it has hived off its sponge iron business named Vikram Ispat, which has manufacturing facility at Salav in Raigad (Maharashtra) into a subsidiary.
"Welspun should infuse the proposed offer of Rs 1,030 crore into the subsidiary for the equity and debt portion. Consequent to infusion of funds, the subsidiary will pay the amount to Grasim and the business undertaking of Vikram Ispat will get transferred to Welspun," said sources.
The revenue from the deal is expected to trigger the profit of Grasim in the next two quarters.
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Earlier, Aditya Birla Group had plans to enter into alloy steel production through Vikram Ispat. But the plans have not materialised.
Vikram Ispat is wholly owned by Grasim Industries and one of the most valuable companies under the group.
It has the potential to be a major player in the steel sector as the group already has iron ore mining operations under the banner of Essel Mining in Orissa.
Essel has applied for 2 new mines at Barbil in Orissa and has sought necessary approvals from the Centre and the state government.