Sandur Manganese and Iron Ores Limited (SMIORE) is a well-established company, incorporated in 1954, engaged in the business of exploration, prospecting and mining of manganese ore, iron ore and also, manufacture of ferroalloys. It is currently operating in Ballari district of Karnataka. The equity shares of the company are presently listed on BSE and in process of listing on NSE.

Star Metallics and Power Private Limited (SMPPL) is a subsidiary of SMIORE who is currently holding 80.57% stake in the company. SMPPL has a ferroalloy plant with two furnaces and a 32 MW thermal power plant which is used as a captive unit for its ferroalloy operations and is operating at Hosapete Taluk of Ballari district. Under a Facility Lease Agreement, SMPPL has leased out both the ferroalloy plant and thermal power plant to the Transferee Company for a tenure of three years which is due to expire on January 31, 2019.

Transaction

  • SMIORE amalgamating its subsidiary company SMPPL with itself with an appointed date of April 1, 2018.
  • Equity shares held by SMIORE (i.e. 80.57% of total paid-up capital) in SMPPL will stand cancelled, and for balance shareholders, 1 (one) equity share of Rs 10 each of SMIORE for every 72 (Seventy-Two) shares of SMPPL.
  • Rationale being SMIORE seeks to have captive use of manganese ore in the existing ferroalloy plant of the SMPPL and set up a 1 MTPA Integrated Steel Plant in the vicinity of the ferroalloy plant which will enable captive consumption of its iron ore also.
  • In addition, on setting up the proposed integrated steel plant, SMIORE will become eligible in terms of Rule 6(3) of the Mineral (Auction) Rules 2015, to participate in the auction of ‘mines specified for end-use’ by the Government of Karnataka.
  • Other reason being to reduce power cost generated from SMPPL power plant, SMIORE is working on PIG Iron Project with an ultimate plan of getting into steel manufacturing. This project will help in reducing power cost by 50% – 80% by supplying waste heat and flu gas generated from this plant and SMPPL is not in the position to invest on such a large scale and hence this can help the SMIORE in greater integration and greater financial strength and flexibility for the SMIORE.

Accounting Treatment

  • The amalgamation shall be accounted in the books of account of the SMIORE according to “Pooling of Interest Method” of accounting as per Ind AS 103.
  • All the assets and liabilities of the SMPPL shall be recorded at their carrying amounts as at the Appointed Date in the books of the SMIORE.
  • Inter-company balances and investments, if any, shall be cancelled and shall be adjusted against the General reserves/balance in Profit and Loss Account;
  • The identity of the reserves of the SMPPL shall be preserved and they shall appear in the financial statements of the SMIORE in the same form and manner, in which they appeared in its books.
  • The difference between the amount recorded as share capital issued by the SIMORE and the amount of paid-up share capital of the SMPPL shall be adjusted against the General Reserves/balance in Profit and Loss Account

Shareholding

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