ICICI Securities has a "buy" call on the stocks of Jindal Stainless (JSL) and Jindal Stainless (Hisar) (JSHL), which are set for a merger. The board of directors of JSL and JSHL have accepted the recommendations of the respective board committees and approved the merger of JSHL into JSL. According to ICICI Securities, the transaction between Jindal Stainless (Hisar) and Jindal Stainless Ltd is an all-equity merger.
Among the top 10 largest stainless steel producers in the world
"Merger of JSHL into JSL (as and when approved) will create a stainless-steel entity that will be among the top 10 stainless steel (SS) companies in the world and the largest stainless-steel company in India. The merged entity will have a stainless steel melt production capacity of 1.9 million tonnes per annum (MTPA). The proposed merger will also create an integrated entity with enhanced downstream capabilities. In terms of product basket, the merged entity will have a diversified end-to-end product portfolio including 120+ stainless steel grades," ICICI Securities has stated in its report.
Valuation & Outlook
"If the potential consolidation of both companies materialises, it is expected to result in economies of scale and better bargaining power for the combined entity. The potential consolidation would also enable harnessing of the complementing strengths of individual companies. Furthermore, a seamless integration of infrastructure, processes and operational synergies, along with a strengthened balance sheet, would improve financial flexibility. We await requisite regulatory and shareholder approvals. We value JSL at 5x FY23E EV/EBITDA and maintain our target price of | 90. We value JSHL on an SoTP basis and maintain our target price of Rs 170. We maintain BUY rating on both stocks," ICICI Securities has stated in its report.