To sell stake in unlisted firm that is setting up steel and power projects.
The Welspun group is looking to raise $150-200 million in structured finance, private equity placement or similar instruments, according to sources in the know.
It is in the initial stages of fund-raising discussions with potential private investors (PE firms) who will pick up a stake in one of the group’s unlisted entities, which will set up a steel slabs plant and a captive power unit.
The Welspun group is active in manufacturing of textile material and products, buttons, steel and arc welded pipes. It has four unlisted entities in the steel and pipes business.
Names of the possible PE investors and the location or size of the plants are not yet known.
London-based boutique investment banking firm Euromax Capital is said to be advising the company on the fund-raising plan. Bijal Doshi, executive director of Euromax Capital, was not reachable for a comment on the development.
On the possible fund-deployment plans of Welspun, sources said the group is aggressively pursuing backward integration for its pipe business to become an ‘iron ore to pipe-making’ company.
Welspun group officials were not available for comment. Queries sent to the company spokesperson remained unanswered at the time of going to print.
In the pipe-making process, steel slabs are made from iron ore. Then, hot-rolled (HR) coil and plates are made from the slabs.
HR plates are used to make longitudinal submerged arc welded (LSAW) pipes and HR coils are used in helical submerged arc welded (HSAW) pipes. Both the pipes are primarily used in the oil & gas space, with LSAW pipes used for pipelines offshore and in tough terrain, and HSAW pipes for terrestrial purposes.
Welspun makes both HR plates and coil and pipes through Welspun Gujarat Stahl Rohren (WGSRL), the country’s biggest pipe-maker, which is a listed entity.
“Setting up of the steel slab facility will fill in the missing link, thereby completing the backward integration exercise. The group has already kick-started the fund-raising process and should be able to make a closure in 3-4 months,” said the source.
The new facility and the supporting power plant are expected to cost Welspun about $800 million, of which around $300 million will be funded through equity and the balance will be debt, the source added. “The equity component will be funded through a mix of private equity placement and promoter equity,” he stated.
Welspun Power & Steel, an unlisted group entity, had in August announced that it would invest Rs 6,000 crore in a 1.5 million tonne per annum plant in Raigad in Maharashtra and for capacity addition at an adjacent direct-reduced-iron plant.
DNA couldn’t independently ascertain if the latest fund-raising plan is anyway related to the aforesaid project.
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