Grasim Industries Ltd, the flagship company of Aditya Birla Group, on Tuesday announced that the company is hiving off of its sponge iron business by way of a slump sale for a purchase consideration of Rs 1,030 crore. The transaction was approved by the board of directors of Grasim at its meeting held on Tuesday.
Under a court-approved scheme of arrangement, Grasim would transfer its Vikram Ispat undertaking (sponge iron business) into a new special purpose vehicle (SPV), to be formed as a subsidiary company of Grasim for this purpose, which would be funded by Welspun Power and Steel Ltd, through equity investment and induction of debt to acquire the SPV and sponge iron business.
The SPV will use the funds so inducted by Welspun to make the payment of consideration to Grasim. The transaction is expected to be completed within the next 6 months, the company informed. Grasim Industries shares on Tuesday were down 0.47% or Rs 10.50 to close at Rs 2,217.20 on the Bombay Stock Exchange.
The sponge iron business is run under the name of Vikram Ispat. Commissioned in 1993, Vikram Ispat operates as a division of Grasim.
The plant is situated in the Raigad district of Maharashtra. Vikram Ispat generated a sales turnover of Rs950 crore during the financial year ended 31st March, 2008.
Welspun is a closely-held unlisted company having its registered office in Gujarat. It manufactures sponge iron at its plant situated at Anjar, Gujarat.
According to a Mumbai-based analyst, ?The company was trying to sell its sponge iron business from a very long time, but was not getting a proper buyer. However, this is a good development for the company as the deal is worth more than 6 times its EBIDTA. The company has taken advantage of the up-cycle in the sponge iron business.?
JM Financial acted as financial advisor to Grasim Industries in this deal. Enam Securities acted as advisory to Welspun.
