Jindal Stainless Hisar To Merge With Parent Jindal Stainless
Analysts expect the merger to create a combined entity with a stronger balance sheet.
Jindal Stainless Ltd. will merge its subsidiary with itself in a share-swap deal that, according to analysts, will create a combined entity with a stronger balance sheet.
Boards approved the merger of Jindal Stainless (Hisar) into Jindal Stainless, the company said in a statement. The merger is expected to be completed in the second half of FY22. Shareholders will get 195 shares of Jindal Stainless for every 100 held in Jindal Stainless Hisar.
The merger will simplify capital structure, expanding the turnover of the merged business to Rs 20,000 crore. “With 1.9 MTPA melt capacity, the merged entity will be the only Indian company in the league of top 10 stainless steel companies in the world,” Abhyuday Jindal, managing director of the parent and the subsidiary, was quoted as saying in the statement.
According to Vishal Chandok, analyst at Emkay Global Financial Services, the deal seems to be more favourable to Jindal Stainless given higher operating margin and a subsidiary business of Jindal Stainless Hisar.
The merged entity will likely benefit from the cancellation of inter-company debt of Rs 900 crore and elimination of inter-company holding of JSHL into JSL, Amit Dixit, assistant vice president-research at Edelweiss Securities, said. It would also have strengthened balance sheet with net debt-Ebitda lower than 2 times for the merged entity by FY22, he said.
Deal Structure
The mobility business of JSL Lifestyle, a domestic subsidiary of JSHL, would be merged into the parent Jindal Stainless.
Non-mobility businesses would be carved out as a separate new entity, named Jindal Lifestyle.
With this, Jindal Stainless Steelway Ltd. and Jindal Lifestyle Limited will operate as Indian subsidiaries, while overseas operational subsidiaries of JSL in Spain and Indonesia will continue to operate as business units of merged JSL.
Jindal Stainless will be the single listed entity on the stock exchanges with promoters owning 57%, while the remaining 43% will be held by the public.
The merger will lead to operational synergy, with the parent’s proximity to port and raw materials, along with world-class finishing lines, and Jindal Stainless Hisar’s location around key domestic consumption centres, the statement said. The merged entity will present reinvestment opportunities for growth by leveraging ready infrastructure at Jajpur for cost-efficient brownfield expansion, it said.
The merged entity will have a diversified end-to-end product portfolio including 120+ stainless steel grades and a network of eight service centres spread across India and overseas.