Saw Pipes Buys Out Us Steel Facility

SAW Pipes Ltd, a company belonging to the O P Jindal group, has bought over the plate mill facilities of US Steel's unit located near Houston.

The acquisition made through Jindal Enterprises, a wholly owned subsidiary of SAW Pipes Ltd in the US.

The company recently finalised a deal with US Steel to buy the assets of the plate mill, estimated at over $ 500 million.

Jindal Enterprises holds majority stake in the new entity, Jindal United Steel Corporation, the rest of the stake is held by SAW Pipes of the US and some private promoters. US Steel will be the company exclusive marketing arm in the US.

 

Briefing newspersons in the capital yesterday, the chairman of SAW Pipes Ltd, Prithvi Raj Jindal said that the main objective of setting up Jindal Enterprises is to restructure the operations of SAW Pipes' in the US and consolidate them under the general agreement on accounting practices (GAAP).

He however declined to disclose the exact shareholding pattern of Jindal United Steel nor the actual monetary consideration at which the deal was struck citing confidentiality clauses in the agreement with US Steel.

The deal has been financed largely out of debt and partly through foreign exchange earnings of SAW Pipes, Jindal said, without giving any other details. He added that a similar greenfield plant in the country would require an investment of Rs 2000 crore.

SAW Pipes USA had already acquired the pipe making facility at the same site.

The present acquisition of the plate mill and its assets, which include railway link upto the Houston port, the company would be in a position to avail of substantial savings in freight costs through bulk shipment facilities.

US Steel had discontinued the operations at the 1.2 million tonne plate mill which was part of an integrated steel making facility way back in 1986 due to environmental problems.

The Jindals expect to start operations at the plant within this month and achieve a 50 per cent capacity utilisation in the first year. Jindal Enterprises which has been incorporated with a paid up capital of $ 1 million, is also eyeing further acquisitions in the US as and when opportunity arises.

He also did not rule out the possibility of diluting a part of the stake in the company at a later stage and raise capital in the United States market if the need arises.

For the next two years, however, the company will be concentrating on improving the capacity utilisation of the plate mill facility to over 80 per cent.

"The Indian and the United States operations together is likely to yield a turnover of Rs 2000 crore in the next two to three years," Jindal said.

P R Jindal, the eldest of the four sons of O P Jindal, the patriach of the Rs 2700 crore empire said he would be spending nearly 70 per cent of his time in the US in order to personally supervise SAW Pipes' operations there.

SAW Pipes is increasingly expanding its business outside India as the company hopes to get 40 per cent of its revenues from exports over the few years.