Speciality steel producer Arjas Steel Pvt Ltd has acquired the assets of Chandigarh-based Modern Steel, setting foot in northern India and expanding capacity by 50 per cent.
The transaction marks the first acquisition of Arjas, which used to be wholly owned by Gerdau SA of Brazil, before the Latin American company sold the Indian assets to private equity firm ADV Partners in a bid to focus on its core markets.
Arjas operates an integrated steel plant at Tadipatri in Andhra Pradesh, producing alloy steel and focusing on the automotive and energy segments.
With a capacity of 300,000 tonnes, it clocked a turnover of Rs 1,400 crore in the last fiscal.
The acquirer will plough in close to Rs 125 crore for the deal, which includes Rs 86 crore for the assets and around Rs 40 crore for modernisation.
BSE-listed Modern Steel is selling the assets to pay off creditors such as Edelweiss Asset Reconstruction Company.
Sridhar Krishnamoorthy, managing director of Arjas, said the first priority would be to run the modern plants to the nameplate capacity of 150,000 tonnes and stabilise the operation.
In the second phase, it would look at expansion and product diversification.
The product line of the two units will complement each other. The northern asset will be called Arjas Modern Steel and supply to the customers of the region.
“Our capacity should go up by 30-40 per cent in the first year of full operation and turnover reach about Rs 2,000 crore,” the MD told The Telegraph.
The acquisition comes at a time the domestic as well as global economy is upended by the pandemic. Krishnamoorthy said a cautious approach must be taken while growing business during the phase.
While concluding the deal — which is subject to closing transactions — Arjas itself has undertaken a brownfield expansion and value addition exercise.
The company has embarked on a Rs 200-crore project whereby the capacity will go up to 350,000 tonnes. A heat treatment plant will also be set up to produce more value-added products.