New Delhi, March 12, 2022: Kirloskar Ferrous Industries Ltd (KFIL), a leading manufacturer of pig iron and grey iron castings, has completed the acquisition of a majority stake in Indian Seamless Metal Tubes (ISMT). The transaction which was announced in November 2021 envisaged an investment of Rs 670 crore by KFIL into ISMT, by way of subscription of equity shares for Rs 476.63 crore giving a controlling stake of 51.25% and an unsecured loan of Rs 194 crore to ISMT. With this, the company has become a subsidiary of KFIL.
Global Investment bank Singhi Advisors acted as the sole transaction advisors.
ISMT has appointed 5 Directors including Mr. Rahul Kirloskar and Mr. Ravindranath Gumaste of KFIL on the board of ISMT. The original promoter Mr Baldevraj Taneja has resigned from the Board of Directors.
Further, in accordance with the provisions of the SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 2011, the company has also commenced an open offer for acquiring up to 25.05% of the resultant voting capital of ISMT, which amounts to Rs 239.7 crore on full acceptance of the open offer.
The proceeds are intended to be used towards a One Time Settlement of ISMT’s loans of about Rs 3359 crore. As per ISMT’s stock exchange filing on 3rd February 2022, the lenders of ISMT have approved a One Time Settlement of the outstanding debt of the company for Rs 670 crore. ISMT, one of the major manufacturers of seamless tubes in India with an integrated steel plant, had made major investments in power plant, which was funded by debt. The investments did not pan out as per plans and this led to stress in the debt.
As per ISMT’s stock exchange filing on 3rd February 2022, Lenders of ISMT had in the past pursued various schemes for resolution of the debt as per RBI guidelines, prevailing from time to time, including Outside Strategic Debt Restructuring, which could not get implemented due to RBI Circular dated February 12, 2018, scrapping various schemes dealing with stressed assets. Lenders of the Company then decided to explore assignment of debt of the Company as a Resolution Plan. Accordingly, lenders holding 70% of principal debt of the Company assigned the same to Asset Reconstruction Companies (ARCs)/ Asset Management entities. All lenders again considered restructuring of the debt of the Company, prior and subsequent to COVID-19 Pandemic, which however could not be implemented. Lenders have since decided to go for One-time Settlement for the outstanding debt of the Company alongwith change in Management.
This is the second instance in the listed industrial space, after CG Power & Industrial Solutions was acquired by the Murugappa Group in 2020 under settlement with banks with change in management. CG Power has since turned around and has reported a net profit of Rs 814 crore in 9 months of FY22 on a total income of Rs 4088 crore as against a loss of Rs 1324 crore in FY20.
With the acquisition of ISMT, KFIL, one of the largest manufacturers of pig iron and grey iron castings is looking to integrate iron ore to seamless tubes at a consolidated level and diversifying the current product portfolio of KFIL with steel and seamless tubes. In FY22, KFIL reported a total income of Rs 2716 crore for the first 9 months, which is an over 100% increase over Rs 1291 crore reported in the same period in FY21. The profit after tax was Rs 340 crore for the first 9 months of FY22, as against Rs 167 crore during the same period last year, again a 100% increase.
Corporate Comm India (CCI Newswire)
