Merger of Two Jindal Steel Conglomerates Reaches another Big Milestone

Merger of Two Jindal Steel Conglomerates Reaches another Big Milestone

NCLT, Chandigarh bench has recently pronounced order for convening the meetings of the shareholders and creditors.

2nd March 2022, New Delhi: The long wait for the merger of two listed Jindal Stainless Steel giants has finally come to an end. The Chandigarh Bench of National Company Law Tribunal (NCLT) has today announced the merger of the two listed Jindal Stainless conglomerates – Jindal Stainless Limited and Jindal Stainless (Hisar) Limited, while hearing the first motion petition on 25th February 2022.

With this, indeed a great milestone has been achieved in the process of the merger of the two listed Jindal Stainless Steel giants, which is soon usher in augmented steel production in India.

NCLT, Chandigarh Bench Order of Merger of Jindal Stainless Companies

The Chandigarh bench of NCLT has pronounced the detailed order for holding the meetings of the shareholders and creditors, while hearing the first motion petition on 25th February. This meeting will approve the entire scheme for the merger of the two conglomerates. During December 2020, the Board of directors of JSL and its group companies had approved the merger scheme, after which the first motion petition for the merger process was filed with NCLT in March, 2021.

Commenting on this development, MD, Jindal Stainless, Mr Abhyuday Jindal said,

"We've been waiting in anticipation for this order by NCLT. Work is in full swing to complete the procedural requirements within the stipulated timeline. With our expansion underway, the merged company's capacity will be 2.9 million tons per annum by FY23, taking us to the league of top few stainless steel producing companies in the world."

However, the procedure merger will finally conclude and become effective from 1st April 2020, which is the appointed date of the merger.

Merger to Boost Steel Manufacturing in India

The upcoming merger of JSHL with JSL will result in formation of a huge stainless steel conglomerate, one of its kind in India. Importantly, this mammoth deal is going to thrust Jindal Stainless group among the top 10 global stainless steel manufacturers of India.

Moreover, the merged entity is going to have a diversified end-to-end product portfolio covering over 120 stainless steel grades, all with a 360-degree reach to the targeted buyers from all segments. This can be easily understood from the individual product lines being offered by both the entities:

Jindal Stainless Limited (JSL):

The product line of the Jindal Stainless Limited covers mainly high volume stainless steel. So far, JSL actively offers its products to the railway, architecture, automobiles and infrastructure sectors.

Jindal Stainless (Hisar) Limited:

Jindal Stainless (Hisar) Limited (JSHL) principally offers high-margin specialized products, actively serving the value-added segments namely precision strips, razor blade and coin blanks as well as other niche offerings.

Evidently, the merger of these 2 steel giants will result in a combined product line and an augmented production capacity.

Moreover, while JSL is known for its vicinity to the ports and raw material, JSHL's strategically located facility in the key domestic consumption hubs is its greatest strength. Together, both the aspects will result in greater operational synergy.

Favorable Financial Projection

In addition, a single unified entity will result in simplification and rationalization of the capital structure. This will in turn lead to stronger balance sheet and favorable leverage ratios. Ultimately, this will enhance the financial flexibility, and unlock the value for all the stakeholders.

According to the current NCLT order, the JSL is expecting the completion of the merger till first half of FY 2022-23.

In this regard, the standalone pro-forma revenue of the merged entity for Q3 of FY 2021-22 stands at INR 8,880 crore and for first 9 Months of FY 2021-22 at INR 22,896 crore.

Similarly, the corresponding earnings before interest, taxes, depreciation, and amortization (i.e. EBITDA) stand at:

• INR 1,261 crore for Q3 of FY 2021-22 and
• INR 3,444 crore for first 9 Months of FY 2021-22.

All in all, the mega merger deal between the two major steel giants is expected to yield huge prospects for the booming Indian steel industry.