The proposed entity emerging from the merger of domestic arms of industrial gas majors Praxair and Linde would have to sell some of the assets of the latter, particularly the plants that supply oxygen to JSW's steel plant at Bellary in Karnataka.
The proposed entity emerging from the merger of domestic arms of industrial gas majors Praxair and Linde would have to sell some of the assets of the latter, particularly the plants that supply oxygen to JSW's steel plant at Bellary in Karnataka.
These include two air-separation units at JSW's Bellary facility: an 855 tonne-per-day (tpd) plant owned by a joint venture between Linde and Inox Air Products and another 1,800 tpd plant fully owned by Linde.
Linde India holds a 50% stake in Bellary Oxygen Co, the joint venture with Inox Air Products.
These disinvestments, to be done to fulfil antitrust requirements of Competition Commission of India, would have a significant impact on Linde though the impact on the merged entity would be much less as the merger would create market-dominating size, analysts said
"Bellary Oxygen alone contributes close to 39% of consolidated profit after tax for Linde," said Dinesh Kumar Gupta, an analyst with Dalmia Securities.
Bellary Oxygen is the only joint venture of Linde India into which it has invested Rs 57.86 crore. It reaped a profit of Rs 6.25 crore for Linde in 2017.
These assets apart, Linde needs to sell its gas cylinder filling stations in Chennai and Hyderabad, geographies where Praxair is equally strong, analysts said.
Linde also operates air separation units at the premises of major steel-producing plants of Tata Steel at Jamshedpur (2,550 tpd) and Kalinganagar (2400 tpd) and at SAIL's Rourkela plant (1706 tpd), among others, which need not be sold.
Despite the proposed disinvestments, the overall impact on the combined entity would be minimum.
Linde, which earned a revenue of Rs 2,115 crore in 2017, sees the merger as coming together of equals.
"Post merger, the market share of the combined entity would be about 35% for oxygen. We don't see the disinvestment impacting the new entity," an analyst said.
The assets would be lucrative though as the steel industry is currently passing through good times.
"Company has achieved robust profitable growth in the gases division (in calendar 2017), led by our on-site, bulk, packaged gases and special products businesses. This has been made possible by higher loading of the major on-site plants at Jamshedpur, Bellary and Rourkela, driven by an all-time high steel production in India and robust growth in merchant and packaged gases," Linde India chairman Sanjiv Lamba said in the annual report for 2017.
On market dominance issue, both the companies had said their proposed global merger wouldn't have an adverse impact on the Indian market in terms of market pricing of their products and competitive forces currently present in the industry.
There are several global players like Air Products, Air Liquide, Taiyo Nippon Sanso as well as several Chinese suppliers and many domestic players giving competition, Linde had said in response queries by competition watchdog CCI.
With CCI finally giving the approval to the merger, Linde has now started "ring-fencing and hold separate obligations in relation to divestment assets" and decided on appointment of an independent financial advisor to conduct the sale process.
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