MUMBAI, India Indias Welspun Corp. plans to split its business in two, with all assets not related to its core steel tube and plate business being spun off into a new company.
The core company, which claims to be the second-biggest pipe producer in the world with an output capacity of 2.43 million tonnes per year, will continue under the Welspun Corp. name.
The firms remaining steel businesses, as well its infrastructure, oil and gas, and energy units, will be demerged and become Welspun Enterprises.
"We believe that the demerger will create two focused, independently run companies with enhanced value creation across each business. We are committed to all of our businesses," Welspun chairman B.K. Goenka said.
Welspun operates four pipe plants in India, one in the United States and another in Saudi Arabia.
The steel operations under Welspun Enterprises include a 60,000-tonne-per-year plant in Maharashtra, India, which produces rebar and seamless pipe. It also operates Welspun Maxsteel in Maharashtra, which produces hot-briquetted iron and direct-reduced iron at a 900,000-tonne-per-year facility.
The company announced that the board of directors had approved the reorganization of the business into two distinct and focused listed companies at a meeting on May 30. However, the proposal is subject to court approval, the company said.
After demerger, 64 percent of both companies will be held in public shares, and Welspuns net debt will decline to $126 million for its fiscal year ended March 31.
The company said the vertical demerger creates a mirror shareholding across both entities, resulting in no dilution for existing shareholders.
Welspun said it expects the merger to become effective Jan. 31.
A version of this article was first published by AMM sister publication Steel First.