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Wednesday, March 04, 2015
Balasore Alloys buying Rohit Ferro-Tech's Jajpur unit for $164.5M
February 25, 2015: Balasore Alloys is one of the largest ferro alloys producers and suppliers in India.
Balasore Alloys Ltd (formerly Ispat Alloys Limited), which is part of the Ispat Group, has inked a deal to acquire Rohit Ferro-Tech's Jajpur-based manufacturing unit for an enterprise value of $164.5 million (approximately Rs 1,025 crore).
The company has finalised a business transfer agreement with Rohit Ferro for acquisition of its alloys plant at Jajpur district in Odisha as a going concern on a slump sale basis.
Although the deal value was not disclosed as per a deal term sheet prepared by the legal advisors it is worth $164.5 million. However, a large part of this involves debt on the books of the unit. The quantum of equity component and actual cash payout to Rohit Ferro-Tech could not be ascertained.
Shares of Rohit Ferro closed the day at Rs 8.56 a piece, down 0.93 per cent on the BSE in flat Mumbai market. At this price it has a market cap of just under Rs 100 crore.
Balasore Alloys is one of the largest ferro alloys producers and suppliers in India. The company has captive mines in different locations like chromite ore mines in Sukinda Valley at Jajpur Road (Odisha), manganese ore nines in Hathoda (Madhya Pradesh).
Rohit Ferro-Tech, which is into ferro alloy manufacturing, has been facing several problems like non-availability of adequate quantities of raw materials, lower capacity utilisation and low absorption of overheads. Also, its Jajpur unit has been under severe financial stress owing to its high debt exposure.
Considering the prevalent unfavourable business environment and no sign of improvement in short term, the company decided to dispose of the Jajpur unit so as to ease its financial burden and improve its cash flow requirement.
It also has units located at Bishnupur and Haldia in West Bengal.
Law firm Khaitan & Co advised Rohit Ferro-Tech on the sale of the Jajpur undertaking.