The Sajjan Jindal-led JSW Steel announced on Monday it has entered into an agreement to buy out Welspun Enterprises’ stake in Welspun Maxsteel at an enterprise value of R1,000 crore, along with its net current assets as on August 31, reports fe Bureau in Mumbai. “Welspun Maxsteel is located in close proximity to the company’s Dolvi unit (in Maharashtra), offering complementary infrastructure and location to augment the current envisaged expansions at Dolvi,” JSW Steel said in a statement, explaining the rationale. Seshagiri Rao, joint MD and group CFO, JSW Steel, said the deal was value-accretive given the “synergies in supplying surplus pellets to Welspun Maxsteel and use of direct reduced iron from Welspun Maxsteel” in it operations.
Consulting firm EY and law firm Luthra and Luthra advised JSW Steel on the deal.
JSW Steel has stated in the past that it will be looking greenfield growth opportunities as well as acquisitions as it looks to expand its steelmaking capacity while achieving forward integration. Its current steelmaking capacity stands at 14.3 million tonnes per annum. The company ended FY14 with a turnover of R45,298 crore and a net profit of R1,335.51 crore. As on June 30, JSW Steel had a net debt of R35,870 crore.
The enterprise value of R1,000 crore-plus net current assets of Welspun Maxsteel includes long-term debt of R1,087 crore, Welspun said in its statement. “The company had identified Welspun Maxsteel as a non-core business and therefore decided to exit the same.”