JSW Steel has entered into an agreement with Welspun Enterprises (WE) to acquire the entire shares of Welspun Maxsteel (WMSL) that were held by WE. The press release says that JSW will be paying Rs 1000 crore for the enterprise value. WMSL has a long term debt of Rs 1087 crore
Investopedia explains that enterprise value is a "measure of a company's value, often used as an alternative to straightforward market capitalization. Enterprise value is calculated as market cap plus debt, minority interest and preferred shares, minus total cash and cash equivalents."
JSW Steel has an installed steel capacity of 14.3 MTPA and it wants to take it up to 40 MTPA in the next ten years.
The company said in a statement that the WMSL is situated just 40 kms away from the company's Dolvi unit which is a favourable location for JSW Steel. Seshagiri Rao, Joint MD & Group CFO said, “This acquisition is value accretive to JSW Steel due to synergies in supplying surplus pellets to Welspun MaxSteel and use of DRI from WMSL in company’s steel-making operations at Dolvi plant.”
The statement gave out the details of the accquired enterprise, which has an installed capacity of 0.9 MTPA gas based DRI plant, with a captive jetty and a captive railway siding. DRI plant is located in Salav village in Raigad district of Maharashtra. Captive jetty has an existing capacity of 2.5 MTPA which is located at 1.8 km from the plant, while the captive railway siding is located at Roha junction on national Konkan Railway, 35 km from the DRI plant. WMSL also has vacant land of . 480 acres, available for future expansions.
JSW Steel will aim to bring down the cost of WMSL by replacing the buying of pellets with ones manufactured by the Amba River Coke, a subsidiary of JSW Steel.
JSW Steel had also acquired Ispat in 2010 for Rs 2157 crore.