JSL, JSHL hit new highs ahead of merger; zoom over 100% in 6 months

Jindal Stainless (Hissar) has fixed Thursday, March 9, 2023, as the record date for its merger with Jindal Stainless with a swap ratio of 1: 1.95

Shares of Jindal Stainless (JSL) and Jindal Stainless (Hisar) (JSHL) continued at their northward movement, hitting their respective new highs on the BSE in Wednesday's intra-day trade, ahead of their amalgamation.

JSHL has fixed Thursday, March 9, 2023, as the record date for its merger with JSL. JSHL board had approved the merger of JSHL into JSL with a swap ratio of 1: 1.95. For each share held in JSHL, a shareholder will get 1.95 shares of JSL.

Against this backdrop, shares of JSL rallied 6 per cent to Rs 318.80 in the intra-day trade today, while JSHL gained 3 per cent to Rs 557.55 on the BSE. In comparison, the S&P BSE Sensex was down 0.22 per cent at 60,095 at 01:20 PM.

In the past six months, the market price of JSL has zoomed 138 per cent, while JSHL has soared 113 per cent, as against less than 1 per cent gain in the Sensex.

Post merger, the merged entity, JSL, would enter the league of top 10 global stainless steel producers. "This would also pave the way for consolidation of stainless steel business into one entity with a total capacity of 1.9 million tonnes per annum (MTPA). Merger with JSL will help in consolidation of complementing strengths with stronger financial positioning," JSHL said.

JSL is amongst the leading stainless steel manufacturing companies in the world, and is India's largest stainless steel manufacturer. The company operates an integrated stainless steel plant at Jajpur, Odisha. The complex has a total stainless steel capacity of 1.1 million tonnes per annum.

In railways, the wagon industry has been doing quite well. The production of wagon in the first nine months of the current fiscal year has already exceeded the full year production of previous year. JSL's sales to the wagon industry have gone up by 12 per cent quarter-on-quarter basis in December 2022 (Q3FY23) quarter.

The management expects strong performance from this segment in the coming quarter also. Focus on Vande Bharat train set and Metro coaches continue to support stainless steel demand further in the coming future.

However, during Q3FY23 and the nine-month FY23, combined exports stood at only 4 per cent and 10 per cent respectively. With the removal of export duty, the management expects a gradual ramp up in exports depending upon the demand in the international market.

Going ahead, analysts at ICICI Securities expect JSL to reap the advantages of volume growth driven by significant opportunities in the domestic market in value-added segments such as railways and automotive; and repeal of export duty, which is likely to aid volumes in the premium segment.

The Jindal Stainless group is likely to sustain its healthy operating performance over the medium term, aided by healthy demand for stainless steel. Absence of any significant term debt obligation and healthy cashflows over the next two fiscals should help sustain the financial risk profile, according to Crisil Ratings.