Essar Steel has agreed to buy the assets of Shree Precoated Steels (SPSL), a part of the Mumbai-based Ajmera group. The deal is expected to cost Rs 600-700 crore.
“SPSL has fixed assets worth Rs 600 crore and long-term debt of Rs 175 crore. As part of the due-diligence process, the current assets and liabilities will be valued to conclude the deal,” said J Mehra, chief executive, Essar Steel.
The acquisition, he said, would be funded mainly through internal accrual. The steelmaker has Rs 800-900 crore cash and cash equivalent. Debt is Rs 5,200 crore, about 1.1 times the equity.
Essar has entered into a definitive business transfer agreement with SPSL to acquire its entire assets and steel business, said the company in a statement. The assets that will be sold include a plant comprising a colour coating line of 4,00,000 tonnes annual capacity, a 600,000-tonne cold rolling mill, a 500,000 mt galvanizing line and a 650,000-tonne pickling line.
With this agreement, Essar Steel will become the country’s largest cold-rolled steel maker, with an annual capacity of two million tonnes. Further, it will become the largest colour-coated steel producer, with an annual capacity of 0.4 MT and the largest exporter of colour-coated steel.
Essar Steel will also take over the outstanding debt and net current assets of the company. SPSL’s plant is located at Sanaswadi near Pune.
“This is an excellent addition to our steel business and will enable Essar Steel to provide the entire range of flat steel products to our customers,” said Shashi Ruia, chairman, Essar group.
With the acquisition, the topline of the company will grow by Rs 2,600 crore, while Ebitda (earnings before interest, taxes, depreciation and amortisation) will see an addition of Rs 175-200 crore, said Mahadeva Iyer, director-finance. The acquisition will give Essar the country’s only steel plant with integrated facilities from heavy plates, hot rolling, cold rolling, galvanizing and colour coating, with a full distribution business, service centre and steel hypermarts, said Mehra.
