Andhra Pradesh-based Arjas Steel has agreed to acquire Modern Steel and modernise the Punjab-based company’s facilities, with a total investment of Rs 125 crore.
Both companies manufacture specialised steel for the automotive sector. After the acquisition, Arjas Steel will be able to supply steel products to clients like Maruti Suzuki and Hero MoroCorp in northern India from Modern Steel’s plant in Punjab, saving significantly on the freight costs, managing director Sridhar Krishnamoorthy told ET.
Arjas Steel also plans to take up a debottlenecking initiative at its Andhra facility involving an investment of more than Rs 200 crore, he said.
Both Arjas and Modern are special steel manufacturers catering to the automotive sector. Arjas has its facility located at Tadipatri in Andhra Pradesh, while Modern’s factory is at Mandi Gobindgarh in Punjab. The acquisition, for which a definitive agreement has been signed, involves an initial cost of around Rs 86 crore and the total cost will reach around Rs 125 crore along with the modernisation process over the next one year.
The acquisition of Modern Steel with an annual capacity of around 150,000 tonnes will increase the total capacity of Arjas Steel to about 450,000 tonnes. The Andhra-based company, which had closed fiscal year 2020 with revenue of around Rs 1,800 crore, hopes to consolidate its position with the acquisition of Modern Steel, which posted around Rs 800 crore of revenue.
“The special steel manufacturing sector is highly fragmented… and one of the ways to grow is to look for capacities that we can add easily,” Krishnamoorthy said.
Source: Economic Times