Kalpataru Power Transmission (KPTL) on Saturday announced that its subsidiary JMC Projects will be merged into itself to benefit from synergies, create a stronger balance sheet and to enable the combined entity to bid for larger projects.
The combined entity has an outstanding orderbook of Rs 37,000 crore, as per an investor presentation. The company has set itself a target of achieving $3 billion (Rs 22,400 crore) in annual revenues by 2025 with an orderbook size of $6 billion.
KPTL holds about 68% stake in JMC Projects. The shareholders of JMC Projects excluding KPTL will be given one share of KPTL for every four shares they hold, as per a press statement.
The merger will enable the combined entity to bid for larger and more complex EPC (engineering, procurement and construction) projects, the company said. The combined entity will have business interests ranging from power transmission and distribution, railways, oil and gas, buildings and factories, water projects and urban infrastructure.
While JMC Projects has developed more expertise in civil engineering, KPTL has developed expertise in more technical fields like electrification, pipeline and railway, said Manish Mohnot, the managing director of KPTL.
“While we could’ve done things together, a lot of projects don’t allow joint ventures (to bid),” he told ET. “Now, our ability to bid for larger projects will increase by 2X, if not more than that.”
The merged entity would also have a better balance sheet, he said.
“KPTL has a huge balance sheet with low debt. JMC has huge orderbook with high carrying,” the managing director told ET. “KPTL is getting money at 6-7%, JMC is getting money at 10-11%. KPTL is surplus on cashflow, JMC is struggling for cashflow.”
KPTL has a standalone orderbook of Rs 12,646 crore while JMC Project’s standalone orderbook stood at Rs 19,192 crore as of 31 December.
The merged company will also be able to leverage KPTL’s larger presence overseas to speed up JMC Project’s overseas business.
The companies will also save on costs by combining a lot of their support functions. The company estimates cost savings to be to the tune of Rs 100 crore in the short term and a 50-100 basis point improvement in margins over the medium to long term.
“2 plus 2 will become 22 here, not 4,” Mohnot said.
The stock of Kalpataru Power Transmission closed at Rs 389.35 on the BSE on Friday. JMC Projects (India) stock closed at Rs 92.75.
