Mumbai, June 10: Grasim Industries, an Aditya Birla Group company, has decided to sell its sponge iron business to Welspun Power and Steel for Rs 1,030 crore.
The slump sale of the business was cleared by Grasims board of directors today.
Under a court-approved scheme, Grasim will transfer its Vikram Ispat undertaking, which manages the sponge iron business, to a new special purpose vehicle (SPV), which will be formed as a Grasim subsidiary.
Welspun Power and Steel will pump equity into the SPV and induct debt for the acquisition of the business.
The SPV will use the funds so inducted by Welspun to make the payment of consideration to Grasim, the company said in a statement.
The transaction is expected to be completed within the next six months.
Ravi Kastia, head of the sponge iron business, said Grasim was selling the outfit as it wanted to concentrate on its core businesses.
Cement and fibre are our core businesses. We would like to concentrate on them. The Rs 1,000 crore from the selloff will be infused in these two businesses, he said.
The sponge iron business overall is doing very well in the country and the players are making money. However, the kind of sponge iron Grasim was producing required gas. The group exited the business as it got a good valuation, said a sector analyst.
Commissioned in 1993, Vikram Ispat operates as a division of Grasim.