India-based steelmaker JSW Steel has announced that it has entered into a definitive agreement with Welspun Maxsteel Limited (WMSL) in a deal worth around INR 10 billion ($165 million). According to the agreement, JSW Steel would acquire the entire equity shares held by Welspun Enterprises Ltd in WMSL. The acquisition is scheduled to be completed on August 31, 2014, subject to the relevant regulatory approvals and customary closing conditions.
JSW has surplus pellets at its subsidiary Amba River Coke Limited which will be supplied to WMSL. The cost of production at WMSL is expected to come down due to replacement of a significant portion of its bought-out pellets with captive pellets. The direct reduced iron (DRI) produced by WMSL shall initially be used partly by JSW Steel's Dolvi unit, and will be consumed in its entirety by the unit in question upon completion of its ongoing capacity expansion to 5 million mt per year.
JSW is a major player in the Indian steel industry with an installed capacity of 14.3 million mt per year. The company has a strategic goal to enhance its steel production to 40 million mt per year in the next decade. WMSL's close proximity to JSW Steel's Dolvi unit provides a huge advantage in capacity expansion.