Jindal Stainless (Hisar) fixes record date for merger with JSL; stock up 3%

JSHL Board approved merger of the company into Jindal Stainless with a swap ratio of 1: 1.95

Shares of Jindal Stainless (Hisar) (JSHL) hit a record high of Rs 504.55 as they gained 3 per cent on the BSE in Friday's intra-day trade after the company fixed March 9, 2023 as the record date for merger with Jindal Stainless (JSL). The stock surpassed its previous high of Rs 494.95, touched on February 3, 2023.

"The board has decided to fix Thursday, March 9, 2023 as the Record Date for the purpose of determining the entitlement of the equity shareholders of the company for issue of equity shares of the JSL pursuant to the Part B of the Composite Scheme,” JSHL said in an exchange filing.

JSHL Board approved merger of JSHL into JSL with a swap ratio of 1: 1.95. For each share held in JSHL, a shareholder will get 1.95 shares of JSL. The appointed date for the deal was April, 1, 2020 and it is likely to conclude in FY2023

Meanwhile, shares of JSL gained 1.5 per cent on the BSE in the intra-day trade today, and hit a high of Rs 274.75. The stock had hit a record high of Rs 275 on February 22, 2023.

On rationale behind the merger, the company said the merged entity - JSL, as an Indian MNC, would enter the league of top 10 global stainless steel producers. This would also pave the way for consolidation of stainless steel business into one entity with a total capacity of 1.9 million tonnes per annum (MTPA). Merger with JSL will help in consolidation of complementing strengths with stronger financial positioning, JSHL said.

Meanwhile, in the past six months, the stock price of JSHL (up 104 per cent) and JSL (up 118 per cent) have more-than-doubled at the bourses. In comparison, the S&P BSE Sensex was up 1.2 per cent during the period.

According to analysts at ICICI Securities, JSL is at the cusp of profitability/volume improvement largely on the back of commissioning of new capacity (1.0mntepa) and removal of export duty. Furthermore, the acquisition of JUSL (Jindal United Steel Ltd) is likely to improve margins by ~Rs 4,000/t.

"Taking cognisance of regulatory overhang being removed, we raise our valuation multiple by 10 per cent to 5.5x. We also raise JSL's (standalone) FY24E volume to 1.4mnte (earlier 1.1mnte) led by better avenue for exports and improving domestic potential,” the brokerage firm said in a report. The stock, however, is trading above their target price of Rs 270 per share.