Spain's Tubacex SA is acquiring 67.53 per cent stake of seamless stainless steel tubes division of Indian metal products maker Prakash Steelage for Rs 254 crore ($40 million), it said on Friday.
As part of the deal, the seamless stainless steel tubes unit of the Indian firm will be transferred to a new company in which the foreign partner will acquire a majority stake.
Prakash Steelage will get Rs 206 crore ($33 million) for the sale of the business and the remaining Rs 48 crore will be infused into the JV by Tubacex. The deal values the unit at around $60 million.
The seamless stainless steel tubes division of Prakash Steelage employs around 250 people and has a turnover of around €25 million (Rs175 crore).
For Tubacex, this acquisition is part of its plans to improve its position in growing markets, especially in Asia, where the group is also increasing its commercial presence, Tubacex said.
“We are fully aware of the market situation, with the fall in oil prices and slowdown in investment but this is a strategic medium and long-term decision that will enable us to increase our presence in the market and our proximity to clients,” Jesús Esmorís, CEO of Tubacex, said.
Tubacex caters to industries like oil and gas, petrochemicals and power generation, which account for over 90 per cent of its sales. The remaining 10 per cent comes from the mechanical and aerospace industry, among other sectors.
It has production plants in Spain, Austria, China, Italy and the US, services centres in Brazil, France and Houston, as well as subsidiaries and sales offices in fourteen counties.
Tubacex has annual sales of €700 million, over 90 per cent of which is generated outside its home market.
Prakash Steelage will continue to own and operate other businesses, including the stainless steel welded tubes and pipes business.
Shares of Prakash Steelage were trading at Rs 160.2 each, up 14.4 per cent on BSE in a strong Mumbai market on Friday.
It currently has a market cap of Rs 280 crore.
(Edited by Joby Puthuparampil Johnson)