Essar Steel, part of the Ruia-controlled diversified conglomerate, is close to acquiring a majority stake in Shree Precoated Steels of the Ajmera Group, in a move that will consolidate its presence in the value-added steel market and make it one of the largest players in the cold-rolled segment.
A person close to the development said the acquisition would give Essar Steel control over Shree Precoated Steels’ manufacturing unit and over 200 acres of land at Ranjangaon near Pune. The deal size is estimated at around Rs 700-800 crore.
While Essar Steel declined to comment on the deal, Shree Precoated Steels MD Rajnibhai Ajmera didn’t return calls made by ET. An e-mail sent to him also remained unanswered. Ranjangaon is considered to be an auto manufacturing hub and is home to a large number of auto majors, including Bajaj Auto.
Colour coated steel and galvanised steel, which are made at Shree Precoated Steels, are also used by auto companies, although it couldn’t be confirmed whether Shree Precoated Steels supplies its products to Bajaj Auto. Shree Precoated Steels is an unlisted company of the Ajmera group and has the capacity to make about 600,000 tonne of cold rolled steel — a major input for cars and consumer goods — and about 450,000 tonne of galvanised steel and about 350,000 tonne of colour-coated steel.
For Essar Steel, the deal is strategic in nature as hot rolled coils, the base grade steel category from Essar Steel’s Hazira unit, can be transported to Shree Precoated Steels’ Ranjangaon unit for value-addition. Although Essar Steel, run by brothers Shashi and Ravi Ruia, is the third-largest steelmaker in the country, it has a marginal presence in the value-added steel segment, which typically commands a premium of above 30% over hot rolled coils.
Shree Precoated Steels had earlier been sought after by the Jindals of the JSW group in 2000, when the Jindals were finalising plans to increase their presence in galvanised steel near Mumbai, to export to premium markets such as Europe and the US. However, the talks with the Jindals fell through due to differences on valuations, and JSW, subsequently, strengthened its operations in Vasind and Tarapur.
For the fiscal year ended March 2008, Shree Precoated Steels had sales of around Rs 1,940 crore. Subsequently, the company has undergone a substantial reorganistion through a rather complicated scheme of demerger.
In March 2009, the Bombay High Court approved a demerger of the steel division of Shree Precoated Steels and the transfer of this division to an unlisted company called Ajmera Precoated Steels to form a new company also called Shree Precoated Steels. What was earlier known as Shree Precoated Steels is now known as Ajmera Realty & Infra, which is a listed company.
Global consulting major PricewaterhouseCoopers (PwC) had advised Shree Precoated Steels on the demerger, apparently in a bid to retain the focus of the Ajmera group on real estate. ET was unable to obtain further details of the scheme of demerger and its connection, if any, with the subsequent acquisition by Essar Steel.
The Ajmera family owns 62.45% in Ajmera Realty and Indra, the listed company, according to data culled from stock exchanges.
Source: Economic Times