Jindal Stainless Plans Buyout For Cr Unit Hive Off. (Business Standard 14.12.99)

Jindal Stainless Limited (JSL), part of the OP Jindal group, has convened a board meeting on December 15, 1999, to consider a proposal to acquire a company as a subsidiary for the purpose of transferring its cold rolling (CR) division at Vasind.

Confirming this yesterday, top JSL officials said that the acquisition of the subsidiary has become imperative for hiving off the Vasind unit, which is no longer consistent with the company's focus on stainless steel.

"The name of the subsidiary and other issues will be worked out at the meeting," officials said.

Subsequent to the acquisition of the subsidiary, the division would be hived off along with attached loans, enabling JSL to clean up its balance sheet for the current year.

"The transfer would, of course, be made at book value and at an appropriate time, based on subsequent valuations, the units would be sold to Jindal Iron and Steel Co. (JISCO) as per original plans," officials said.

Earlier, Jisco was slated to take on the unit at a gross consideration of Rs.75 crore, but financial institutions had objected to this, since the company was already in trouble financially. JSL was, therefore, asked to prepare an alternative scheme which would enable Jisco to take on the unit on a deferred payment arrangement.

Again in October this year, institutions decided to watch the performance of Jisco for another 3-4 months before inviting JSL to present its reworked scheme of arrangement for the sale of the Vasind unit.

According to officials, "Institutions had no objection to even the original scheme technically, but the timing, they felt, was wrong from the Jisco point of view, given its cash-strapped situation."

The deferment of the scheme by institutions, however, implied that JSL would have to continue to bear the cost of operations of the Vasind unit longer than it had planned and therefore its restructuring procedure would not be completed immediately.

Cold rolled products account for only 10 per cent of its total turnover, with the remainder coming from its core produat, stainless steel.

JSL feels that carrying on with the Vasind unit further would affect the company's balance sheet for the year.

"As an interim measure until Jisco is in a position to take on the unit, the company has decided to separate the unit from its main operations by hiving it off to a subsidiary," officials said.