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Welspun Corp to buy back Apollo Global’s stake in steel unit; splitting non-pipe businesses into separate listed firm

30 May, 2013

Apollo Global-backed Welspun Corp Ltd is splitting its steel, oil & gas exploration, energy and infrastructure businesses into a separate listed firm, which will make it a focused pipe manufacturer, as per a stock market disclosure.

The firm’s board has decided to retain pipes and plates businesses in the existing Welspun Corp while the rest of the businesses will be spun off into another listed firm christened Welspun Infra Enterprises Ltd.

The firm has also disclosed that it will acquire 12.5 per cent stake of Welspun Maxsteel Ltd, held by Insight Solutions Ltd at 30 per cent discount to the fair market value. With this move, the company’s ownership in Welspun Maxsteel will rise to 99.85 per cent. Welspun Maxsteel houses sponge iron (steel) business.

This will also mark a part-exit of Apollo Global from the investment in BK Goenka-promoted Welspun Group.

The private equity giant had invested $350 million 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 initially picked up 12.5 per cent stake in Welspun Maxsteel Ltd from Welspun Steel Ltd for $31 million and was to invest another $29 million in the company. This stake is now being acquired by the parent firm.

The Welspun group has diversified businesses and it has multiple firms under the flagship company Welspun Corp. Some of these firms are listed including a part of the infrastructure business housed under Welspun Infratech (it owns majority stake in the public-listed Welspun Projects Ltd).

The group 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.

The group also had its share of restructuring over the years. 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 last year.

The latest demerger move may allow the firm to raise funds for its businesses separately, but will not consolidate the businesses as there will be operational overlaps in separate listed firms.

For the year ended March 31, 2013, Welspun Corp had consolidated revenues of Rs 10,870 crore, up 21 per cent over FY12, but slid into net loss of Rs 70 crore against the net profit of Rs 238 crore in the previous year.

(Edited by Sanghamitra Mandal)


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Welspun Corp to buy back Apollo Global’s stake in steel unit; splitting non-pipe businesses into separate listed firm

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