Welspun To Merge With Its Subsidiaries
Spinning In A New Direction Towards Growth: Welspun To Merge With Its Subsidiaries
The corporate structure of Welspun Enterprises Limited/WEL is about to undergo a change. Following a meeting, the company has decided to consolidate and simplify the corporate structure of the company and its subsidiaries.
The boards of WEL and Welspun Projects or WPL have taken the decision to merge WELF, Welspun Infratech/WITL, Welspun Plastics Pvt Ltd/WPPL and Welspun Infra Projects Pvt Ltd/ WIPPL with WPL. The statement had said that all the companies will merge with WPL. The latter company is a listed entity.
It has been decided that shareholders of WEL will get 12 shares of WPL for every share held in WEL. The scheme will come into operation with effect from April 1. WEL holds around 61.12 per cent stake in WPL. This is through its 100% subsidiary WITL. The same shall be cancelled with effect from the day the agreement comes into effect.
Welspun has been undergoing a lot of changes recently in terms of its mergers and de-mergers. This is the latest move by Welspun for making the change towards new growth patterns and directions. Its consolidation will enable WEL, its subsidiaries and WPL to “better leverage their strengths and target opportunities, which need large free cash and strong balance sheet to put the resultant entity on an accelerated growth path.”
This combined entity will have cash resources amounting to INR 800 crore. “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 cash flows,” the statement released by this company said.
This scheme is yet to be approved and it will get requisite approvals of stock exchanges and sanctions of the HC of Bombay and Gujarat. The three units of its commodity trading arm are being merged by Welspun with its engineering unit. The aim is to simplify its corporate structure and leverage the strength of the balance sheet once it has been combined.
Global private equity firm Apollo Global now holds 13,33 stake in Welspun Enterprises. It will get 12.17% of the combined entity under Welspun Projects in terms of the share swap. The promoters will own 34.7% of the consolidated entity. It has invested USD 350 million in terms of a minority stake in Welspun Corp Ltd for USD 290 million and Welspun Maxsteel Ltd for USD 60 million.
Earlier this year, the steel, oil & gas exploration and energy as well a infrastructure business of Welspun Corp were placed in a separate listed firm Welspun Enteprises. Spinoffs were on the rise this year, but this merger of three into one has certainly made the news.
Welspun seeks to move to a more mobile status and release its vast number of resources into the market. The play of forces have been such that the current situation is one where spin-offs have been on the rise. With this amalgamation, it could be the turn of mergers to become a source of growth.
