Following the announcement, shares of the small-cap company hit an upper circuit of 5% at Rs 1269.90 on the BSE.
Godawari Power & Ispat (GPIL) said that its board has approved the proposal for sub-division of equity share of face value of Rs 10 each of the company into two equity shares of Rs 5 each (2-for-1), subject to approval of the shareholders of the company.
The company's board has also decided to issue bonus shares in the ratio of 1:1 by capitalizing the free reserves after the proposal for split of the shares is approved by the shareholders of the company.
In order to obtain the approval of the shareholders of the company for sub-division of shares, issue of bonus shares, increase in authorized share capital and for alteration of capital clause of memorandum of association of the company, it has been decided to convene and hold an extra ordinary general meeting of the shareholders of the company on 14 October 2021, the company said in a statement.
Further, the board of GPIL has decided to withdraw the scheme of arrangement for demerger of power business undertaking of Jagdamba Power & Alloys and merge it into the company. The scheme was approved by the board of directors in their meeting held on 24 December 2019.
The board was expecting to complete the process of demerger in a period of 6 to 8 months but because of the ongoing pandemic, there was a delay and even the first motion of application has taken over 19 months and is still not complete. During this period of 20 months steel sector has witnessed a robust growth and market dynamics have been changed drastically. Hence, the valuations are incomparable and are not be commercially viable as envisaged at the time of approval of scheme by the board. It has, therefore, been decided to withdraw the scheme," the company said.
Meanwhile, the board also decided to withdraw the proposed divestment of equity stake in Godawari Green Energy (GGEL).
The board in its meeting held on 1 May 2021 had approved proposal for divestment its entire shareholdings in GGEL, being a non-core business and utilize the proceeds towards repayments of its outstanding debts. The proposal was also approved by the shareholders in their meeting held on 12 June 2021.
However, before the deal could be finalized for sale of investments with any prospective buyers, the outstanding long-term debts of the company have been fully repaid out of internal accruals due to improved financial position of the company, led by increase in operating margins with increase in pellet prices in global markets.
Moreover the company is generating sufficient funds from internal accruals to meet the near-term funds requirement for proposed capex and working capital. GGEL is generating around 12% return on investment, made by the company.
Looking at no major investment opportunity at reasonable return on investment and pending feasibility study of the proposed expansion in steel business, it is considered appropriate to withdraw the proposal for disinvestment of equity stake held by the company in GGEL, the company said.
The board has also approved the proposal for purchasing 56 lakh equity shares of GGEL, comprising of 22.18% of its fully diluted equity capital, from external Investors at price of Rs 102 per share. Consequently, GGEL shall become wholly owned subsidiary of GPIL. The transaction is expected to be completed within 60 days.
GPIL is an end-to-end manufacturer of mild steel wires. In the process, the company manufactures sponge iron, billets, Ferro alloys, captive power, wires rods (through subsidiary company), steel wires, oxygen gas, fly ash brick and iron ore pellets.
The company's consolidated net profit surged to Rs Rs 434.87 crore in the quarter ended June 2021 as against Rs 46.49 crore during the previous quarter ended June 2020. Net sales during the quarter rose 66.95% YoY to Rs 1126.18 crore.
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