JSW Steel today said its shareholders have approved merger of JSW Ispat Steel with itself, paving the way for the company to become second largest steel producer in the country.
In a filing to the BSE, the Sajjan Jindal-led company said that 99.99 percent shareholders voted in favour of merging JSW Ispat with the company in the meeting, held yesterday.
Now, a formal nod of the Bombay High Court is required to complete the merger process. Post merger, JSW Steel will have an annual production capacity of 14.3 million tonnes and become second largest domestic producer after SAIL.
According to the merger plan, shareholders of JSW Ispat will get one JSW Steel share for every 72 shares they hold. Moreover, JSW Ispat will transfer its Kalmeshwar undertaking and JSW Steel will transfer its downstream undertaking to JSW Steel Coated Products. Besides, JSW Building Systems will also be merged with JSW Steel.
Announcing the merger in September, JSW Steel chairman Sajjan Jindal had said that "this merger will give us a lot of synergy in operation and economies of scale. We can now go for brown-field expansion at Vijayanagar in Karnataka and Dolvi in Maharashtra."
Besides, it will also reduce the cost of borrowing for JSW Ispat and the merged entity is likely to get Rs 250 crore benefit from it. Moreover, the net debt level of the merged entity would be around Rs 25,200 crore with a debt to equity ratio of 1:1.15.
Post-merger, promoters of JSW Steel will hold 35.12 percent in the merged entity, while company's second largest shareholder JFE Steel holding will come down to 14.92 percent. JFE had 15 percent stake in JSW Steel till the time of merger announcement.
JSW Steel had acquired 41 percent stake in debt-ridden Ispat Industries from Pramod and Vinod Mittal, brothers of the steel czar L N Mittal, in December 2010 for about Rs 2,157 crore. Ispat Industries was subsequently named as JSW Ispat.
The trigger for the merger was JSW Ispat clocking a net profit of Rs 478.24 crore during the April-June quarter of 2012, which was its first one in last few years.
After returning to profit making, JSW Ispat would now be eligible to lay claim of deferred tax benefits of about Rs 2,088 crore, which would be a huge gain to JSW Steel.
JSW Steel stock price
On November 24, 2015, JSW Steel closed at Rs 887.90, down Rs 2.2, or 0.25 percent. The 52-week high of the share was Rs 1232.95 and the 52-week low was Rs 801.00.
The company's trailing 12-month (TTM) EPS was at Rs 36.21 per share as per the quarter ended September 2015. The stock's price-to-earnings (P/E) ratio was 24.52. The latest book value of the company is Rs 1030.07 per share. At current value, the price-to-book value of the company is 0.86.
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