Visa Steel seeks shareholder nod for merger of joint venture firm

Visa Steel (VSL) said, on Thursday, it will seek shareholders' approval for the merger of its JV firm Visa Bao (VBL) in an attempt to optimise costs and secure availability of resources for its ferrochrome business.

VBL is a joint venture (JV) between VSL and Baosteel of China, with VSL holding 65% stake and the remaining with Baosteel.

The firm will hold a postal ballot soon to seek shareholders' approval for the proposal and the results are expected next month.

In order to have sustainable growth, it is necessary for any ferrochrome producer to have captive chrome ore mine or a captive power plant, if not both, VSL said in a regulatory filing.

"Hence, with a view to achieving competitive advantage to ensure availability of chrome ore and concentrates and optimise the utilisation of the power plant capacity, it is intended to consolidate the ferrochrome business of VSL and VBL by amalgamating VBL with VSL," it added.

Explaining the rationale behind the merger, the firm said at present, VSL has two submerged arc furnaces for production of 60,000 tonnes per annum (TPA) of ferrochrome and has a 75 MW captive power plant, with infrastructure to scale this up to 1.20 lakh TPA.

Besides, it has also secured a prospecting licence for chrome ore in Manipur for development of captive mine, it added.

On the other hand, VBL is setting up a ferrochrome plant with 4 submerged arc furnaces at Kalinganagar in Odisha. Two furnaces have been commissioned in June 2013 and the remaining are expected to be commissioned in 2015-16 and 2016-17.

VSL's ferrochrome business includes production of high carbon ferrochrome and generation of power for captive use. Production of high carbon ferrochrome is affected due to inadequate and high price of chrome ore and concentrates, it said.

The power plant is not operating at full capacity as the generation is impacted due to non-availability of gas from blast furnace and inadequate availability of waste heat from coke oven and direct reduced iron (DRI) plant, VSL said.