Vedanta's Electrosteel buy is value-accretive; move to buoy earnings

Electrosteel's plants are relatively new and Vedanta can utilise their entire economic life

Mining major Vedanta has taken a step towards adding steel to its armoury, which is expected to buoy its value and earnings.

With the company’s resolution plan for acquisition of Electrosteel Steels being approved by the National Company Law Tribunal, Vedanta will be acquiring a 90 per cent stake in the latter.

According to analysts’ estimates, while the acquisition price of Rs 53.20 billion represents a haircut of 60 per cent for existing lenders, the enterprise value (EV; total of equity and debt) per tonne at $545-560 is significantly lower compared to recent industry transactions. 

The EV would fall to $409 per tonne