Calcutta, July 6: The merger of India Seamless Metal Tubes Ltd (ISMT) with group outfit Indian Seamless Steels and Alloys Ltd (Issal) will create a Rs 1,000-crore engineering company.

The merged entity, to be called ISMT Ltd, will be the largest integrated precision seamless tube manufacturing company in the Asia Pacific region.

The high court in Mumbai has convened meetings of shareholders of both the companies on August 1 to ratify the merger.

The merger will be effective on a retrospective basis from April 1, 2004.

The shareholders of India Seamless Metal Tubes will be offered five shares of Issal for every four held.

ISMT, set up in 1977, produces seamless tubes for the tier I suppliers of auto, bearing, and other engineering OEMs.

Issal, a backward integration project set up in 1994, is a leading producer of specialty alloy steels.

Following the merger, ISMT Ltd will undertake massive expansion projects.

It is using the de-bottlenecking and modernisation process to raise its capacity in the immediate future.

The company plans to increase the 155,000 tpa tube capacity to 200,000 tpa. Moreover, the steel capacity of 190,000 tpa ? which is already manufacturing at the rate of 240,000 tpa ? will be raised to 350,000 tpa.

“This will make ISMT Ltd a leading integrated precision seamless tube manufacturing company in the world,” a company official noted.

The expansion will be completed in the next two to three years. With the expanded capacity in place, the company’s business will touch Rs 1,800-2,000 crore.

The merged entity did business worth Rs 900 crore last fiscal with a net profit of about Rs 40 crore.

This year, it is expected to record a higher profit with emphasis on exports.

“The company’s product mix is undergoing a rapid shift towards high-end goods,” he added.

In 2005-06, only about 15 per cent sales will come from low-end commodity business against 40 per cent in 2003-04.

The volume growth of the company will be largely driven by exports, which have grown at the rate of 40 per cent per annum over the last three years.

Exports are expected to double to over $60 million in 2005-06 from $30 million in 2004-05.

Along with this, a healthy tax shield helps the company to improve its shareholders’ value dramatically.

The merger was directed by the corporate debt restructuring forum.