JSW Ispat Special Steel to transfer Raipur facilities to subsidiary

The transfer will be made via slump sale to wholly-owned subsidiary Mivaan Steels (MSL)

JSW Ispat Special Steel Products (formerly Monnet Ispat & Energy) has decided to transfer the manufacturing facilities at Raipur via a slump sale to a wholly-owned subsidiary, Mivaan Steels (MSL) to “enhance stakeholders’ value and unlock intrinsic value”.

At a meeting that concluded late on Wednesday, the Board approved acquisition of 100 per cent of the equity share capital of MSL to make it a wholly-owned subsidiary and the transfer of the company’s Raipur manufacturing facilities to it.

The transfer is subject to necessary approvals by the stock exchanges, Securities and Exchange Board of India (Sebi), shareholders and creditors of the companies, and the National Company Law Tribunal (NCLT).

A joint venture with AION, JSW Steel has a 23.1 per cent ownership in JSW Ispat Special Products (JISPL). The total consideration to be paid by MSL in cash and debt is to the tune of Rs 443.11 crore.

JISPL was acquired in 2018 under the Insolvency and Bankruptcy Code (IBC) in a deal that led financial creditors to realise Rs 2,892 crore against admitted claims of Rs 11,015 crore. The consortium of AION-JSW was the sole bidder for the asset.

JISPL has manufacturing facilities at Raigarh and Raipur. The facilities at Raipur comprise a sponge iron manufacturing plant with a capacity of 0.3 MTPA, a ferro alloy plant and a steel manufacturing plant with a capacity of 0.25 MTPA.

The unit manufactures products pertaining to the commodity grade market that caters to the structural and construction sectors with comparatively lower volume of production and serves customers predominantly around its operating area, the company mentioned in its statement.

At Raigarh, however, the focus is on special steel products with comparatively higher volume of production, serving customers in the exports and domestic markets covering northern, eastern and parts of western region of India.

The company mentioned that with the transfer of facilities through the proposed transaction, it would be able to focus on special steel products and explore and develop markets for its special steel products.

At the time of acquisition, though, the Raigarh unit had been closed for over four years. But post takeover, production was revived and operations bolstered. A shutdown of the TMT operations was taken, modernized and converted to specialty alloy steel that brought with it the advantage of higher realisations.

However, JISPL’s financial performance has been patchy. In 9MFY22, JISPL reported revenues of Rs 4,372.8 crore and net loss of Rs 1.8 crore on a consolidated basis. In FY21,  revenues were at Rs 4,187.7 crore and profit after tax at Rs 210.6 crore.