Essar Steel entered into a definite business transfer agreement on Monday to acquire Pune-based Shree Precoated Steels (SPS) for an undisclosed sum.
Mr J. Mehra, Chief Executive Officer, Essar Steel, said at a press conference here on Tuesday that the Ajmera Group-owned SPS had fixed assets of Rs 600 crore and fixed debt of Rs 175 crore with a turnover of Rs 2,800 crore.
“We have appointed Ernst & Young to arrive at a valuation based on the current assets and liabilities within 60 days. Essar Steel expects the deal to add an EBITDA (earnings before interest, tax, depreciation and amortisation) of about Rs 200 crore in the next couple of years,” he added.
Cost and funding
But, according to an Essar Steel source, the company would be investing an estimated Rs 700 crore for the acquisition.
With cash and cash-equivalent of Rs 900 crore, Essar Steel will fund the acquisition mostly through internal accruals.
At present, it has debt and equity of Rs 5,200 crore and Rs 4,800 crore, said Mr Mahadev Iyer, Director (Finance).
SPS’ fixed assets include a colour coating line of four lakh tonnes per annum (tpa), cold rolling mill of six lakh tpa, galvanising line of 5 lakh tpa and pickling line of 6.50 lakh tpa. The plant is at Sanaswadi, near Pune, one of the largest steel consuming centres.
Neither Essar Steel nor SPS is listed on the stock exchanges.
Mr Sashi Ruia, Chairman, Essar Group, said the acquisition would enable the company to offer its entire range of flat products.
It has a network of 230 retail outlets called Essar Hypermarts. Mr R.S. Ajmera, Managing Director, Ajmera Group, said an integrated player such as Essar Steel would be able to take this business to its next phase of growth.
Post-acquisition, Essar Steel will have a cold rolling capacity of two million tonnes, colour coating facilities of 0.4 million tonnes, galvanising capacity of one million tonnes and pickling capacity of 2.2 million tonnes.
It has capacity of 10 mtpa at Hazira in Gujarat.
Source: The Hindu Businessline