The Welspun group is bringing together almost all of its infrastructure business under its public listed company Welspun Projects Ltd, to simplify the corporate structure and leverage the strength of a combined balance sheet, as per a stock market disclosure.
This marks yet another corporate restructuring for the Welspun group which has gone through a string of demergers and mergers over the last few years.
Under the proposed reorganisation, public listed firm Welspun Enterprises and three private firms Welspun Infratech Ltd, Welspun Plastics Pvt Ltd and Welspun Infra Projects Pvt Ltd will be merged with Welspun Projects Ltd, which is a listed entity. The combined entity will have cash resources of approximately Rs 800 crore based on balance sheet as on September 30, 2014.
Presently, Welspun Enterprises owns 61.12 per cent equity holding in Welspun Projects through its 100 per cent owned subsidiary—Welspun Infratech Ltd—and the same will be cancelled on the amalgamation. As a result, no treasury stock would be created.
Every shareholder of Welspun Enterprises will get 12 shares of Welspun Projects for every share being held in Welspun Enterprises.
Global private equity firm Apollo Global, which holds 13.33 per cent stake in Welspun Enterprises, will get around 12.17 per cent of the combined entity under Welspun Projects as per the share swap. The promoters will own 34.7 per cent of the consolidated entity.
Private equity firm Apollo Global holds 13.3 per cent stake in the group flagship Welspun Corp. It had invested $350 million three years ago in two group companies – picking minority stake in the group’s flagship Welspun Corp Ltd (for $290 million) and Welspun Maxsteel Ltd (for $60 million).
It had also proposed to invest separately in the group’s infrastructure business, but that did not happen. Apollo later also sold its stake in Welspun Maxsteel to the promoters.
Just early this year BK Goenka-led promoter group had demerged the steel, oil & gas exploration, energy and infrastructure businesses of flagship company Welspun Corp into a separate listed firm Welspun Enterprises, which made Welspun Corp a focused pipe manufacturer. It also gave Apollo separate stake in Welspun Enterprises which would now be swapped for shares of Welspun Projects.
Now it is being merged with one of the half a dozen listed companies of the group. Besides Welspun Corp, Welspun Enterprises and Welspun Projects, the group also has a separate listed textile firm called Welspun India, a filament yarn producer Welspun Syntex and Welspun Investments & Commercials, which is into a combination of trading activities and investment holding business.
In 2008, it demerged the operations of Welspun India into three companies (other two being Welspun Global Brands and Welspun Investments, which is now Welspun Investments & Commercials), only to merge back one of these soon thereafter.
“The merger is aimed to consolidate and simplify corporate structure of Welspun Enterprises and its subsidiaries. The elimination of multiple entities is expected to benefit in terms of superior capital structure, increased flexibility to allocate capital more efficiently, reduction in administrative, compliance cost and enhanced visibility of earnings and cashflows,” the company said.
The appointed date for the proposed merger and amalgamation scheme would be April 1, 2015.
KPMG is acting as tax and regulatory advisor for the entire transaction, while SBI Capital Markets Ltd has issued a fairness opinion on the swap ratio recommended by PricewaterhouseCoopers which has conducted the valuation exercise.
The scheme is, however, subject to approval from the stock exchanges and sanctions of Bombay and Gujarat high courts and is expected to be completed in seven months.
(Edited by Joby Puthuparampil Johnson)