Kirloskar Ferrous takes over Indian Seamless for Rs 670 cr

Kirloskar Ferrous Industries, a leading manufacturer of pig iron and grey iron castings, has picked up a majority stake in specialised seamless tube manufacturer Indian Seamless Metal Tubes (ISMT) for Rs 670 crore.

The deal involves Kirloskar investing Rs 670 crore in ISMT, of which Rs 476.63 crore is equity investment for 51.25 per cent stake and the balance Rs 194 crore is an unsecured loan to the tube manufacturer, the companies said in a statement.

The transaction, advised by city-based investment banker Singhi Advisors, also involves an open offer for acquiring up to 25.05 per cent of ISMT worth Rs 239.7 crore, in accordance with the Sebi takeover norms.

The proceeds will be used towards a one-time settlement of ISMT's loans of about Rs 3,359 crore. The one-time settlement of Rs 670 crore was approved by its lenders in February.

ISMT is a major manufacturer of seamless tubes with an integrated steel plant, along with a power plant that was debt-funded. But, the investment did not pan out as planned, leading to stress and the eventual sale.

Lenders, holding 70 per cent of the principal debt, had planned to assign the debt to asset reconstruction companies, but due to the pandemic, it did not work out, leading to the one-time settlement along with a change in management.

This is the second instance in the listed companies' space after CG Power & Industrial Solutions was acquired by the Murugappa Group in 2020 under a one-time settlement along with management change.

With the acquisition of ISMT, KFIL is looking to integrate its iron ore business with seamless tubes at a consolidated level and diversify the current product portfolio with steel and seamless tubes.

For the first nine months of FY22, KFIL reported an income of Rs 2,716 crore compared to Rs 1,291 crore a year ago and booked a net profit of Rs 340 crore against Rs 167 crore.

ISMT is the country's largest integrated specialised seamless tube manufacturer and produces tubes in the range of 6-273 mm diameter and runs an alloy steel plant that produces a wide range of alloy steels of 20-225 mm diameter.

ISMT reported a 100 per cent increase in revenue at Rs 1,553 crore for the first nine months of FY22 compared to Rs 768 crore in the same period of FY21 but posted a net loss of Rs 171 crore during the period against Rs 231 crore a year ago.

Founded in 1991, Kirloskar Ferrous Industries is a leading manufacturer of pig iron and grey iron castings. The group has a manufacturing and engineering legacy of 130 years.

It supplies to foundries across the country and contributes to auto, engines & compressors, textiles, pumps, and other manufacturing industries.