The scheme would be subject to stakeholders' and regulatory authorities' approval. While Baker Tilly India would be the financial adviser for the transaction, Khaitan & Co would be the legal adviser.
The merger process is likely to be completed by the end of this fiscal's third quarter, a company source said.
The boards of Kolkata-based Electrosteel Castings (ECL) and its associate company Srikalahasthi Pipes (SPL) on Monday approved a draft scheme of amalgamation, proposing that shareholders of SPL receive 59 equity shares of ECL for every 10 equity shares held in SPL.
The move is aimed at consolidating position in the ductile iron (DI) pipe industry.
The scheme would be subject to stakeholders’ and regulatory authorities’ approval. While Baker Tilly India would be the financial adviser for the transaction, Khaitan & Co would be the legal adviser. The merger process is likely to be completed by the end of this fiscal’s third quarter, a company source said.
Both the companies informed the stock exchanges about their draft scheme on merger after the board meeting on Monday. Earlier on September 30, the companies had informed the exchanges about the proposed merger, while intimating about the closure of the trading window. The trading window would open 48 hours after the unaudited financial results of the companies for the quarter and the half year ending September 30 are submitted, the companies informed the exchanges.
Both ECL and SPL are listed with the BSE and NSE.
Both the entities, having similar operations, after the merger will have 8 lakh tonnes of manufacturing capacity in India, pushing up its market share to 30%. The merger will reorganise both the businesses, simplifying the group’s structure and convert it into a single listed entity. This will help the company pursue focused growth for pan-India presence as well as expand its global footprint.
Ashutosh Agarwal, ECL executive director for group finance, said the merger, besides consolidating its DI pipe business, will create a platform to help pursue aggressive growth. “The combined profitability and cash flow of the resultant merged entity will provide an impetus to our growth and act as a force multiplier to our efforts of increasing market share. The financial indicators post the merger will support Electrosteel to maintain its credit rating. We expect Electrosteel to be re-rated on completion of the merger process,” Agarwal said.
ECL took over SPL, erstwhile Lanco Industries, in 2001, and at present holds a 41.3% stake in it.
Both the companies reported a negative net profit – Srikalahasthi Rs (-)7.88 crore and Electrosteel Rs (-)53.55 crore for the June quarter.
After the disclosure, Electrosteel’s share on the BSE traded at Rs 23.10, down by 5.33% from the previous close. Srikalahasthi’s share prices on the BSE also went down by 17.94% and traded at Rs 133.55 after the disclosure.