SISCOL, JSW likely to be merged
In an exercise aimed at bringing its steel operations under a single umbrella, the Sajjan Jindal Group has proposed a merger of the Rs 700-crore Southern Iron & Steel Company (SISCOL) with its flagship JSW Steel.
According to highly placed sources close to the company, the promoters have decided to merge the steel operation under one umbrella to strengthen the group’s balance sheet. The merger process is likely to be completed in the current financial year.
“The promoters (Jindal) are of the view that the merger will help strengthen the balance sheet in term of capacity as well as market capitalisation, which in turn will help finance future growth,” the sources added.
The merger ratio is expected to be in the vicinity of 20:1, 20 equity shares of SISCOL for every share of JSW.
A company spokesperson, however, denied the development. “There is no such move for a merger and the company would not like to comment on rumours and speculation,” he said.
SISCOL’s current market capitalisation is Rs 1,050 crore and JSW is being valued at Rs 13,857 crore. SISCOL was originally promoted by Laxmi Machine Works (LMW) and subsequently taken over by the Jindals after it went through restructuring under the corporate debt restructuring (CDR) scheme.
In case the merger process is completed in the current financial year, the combined revenues of the merged entity will be over Rs 10,000 crore with a profit of around Rs 1,600 crore, the sources said. The company’s promoters hold around 40 per cent in SISCOL and a little over 46 per cent in JSW.
SISCOL is in the middle of an expansion programme to increase capacity to 1 million tonnes from 3 lakh tonnes per annum. The expansion involves an estimated capital expenditure of over Rs 1,000 crore. It has already spent Rs 862 crore. Similarly, JSW has also begun aggressive expansion plans and is setting up green-field projects in Jharkhand and Orissa.