Sandur Manganese and Iron Ore is foraying into the speciality steel sector in India with the buyout of Arjas Steel, which is among the top five producers of speciality steel products in the country.
Sandur Manganese will be buying an 80% stake in the company at an enterprises value of Rs 3,000 crore. It will spend around ?2,400 crore through a mix of equity and debt to buy Arjas Steel, of which around 25-30% will be debt.
A fourth of the acquisition will be funded via internal accruals, with the rest coming in through debt.
“We have been looking out for forward integration into the steel space for quite some time… and this goes well with our strategic growth mindset approach,” managing director Bahirji Ghorpade told ET.
Sandur Manganese has been into iron and manganese ore mining for seven decades now, and recently expanded its capacities.
“We were looking to invest our capex in a greenfield opportunity, but this came forward as an option,” Ghorpade said. Arjas Steel operates two plants in India – one in Andhra Pradesh, and an electric arc furnace in Punjab through a wholly-owned subsidiary.
The two plants have a combined capacity of 500,000 tonne currently. At the Andhra Pradesh unit, capex is underway to increase capacity to 400,000 tonne from 300,000 tonne currently, Ghorpade said.
This capex, which also included the setting up of a 20 MW renewable energy plant, was started last year, and will be completed over the next five-six months. The acquisition, meanwhile, is set to be completed in 4-5 months, and once done, the turnover of both Sandur Manganese and Arjas Steel will be similar.
“It will be one of the most important entity in the scheme of things for Sandur, accounting for 50-60% of the overall revenue,” Ghorpade said.
Shares of Sandur Manganese and Iron Ores ended at 524.30 rupees on the NSE, down nearly 4% from the previous close.
Source: Economic Times