Shares of Kirloskar Ferrous Industries zoomed as much as 10 per cent during early trade on Friday, following its takeover of Indian Seamless Metal Tubes (ISMT).
The leading manufacturer of pig iron and grey iron castings has picked up a majority stake for Rs 670 crore in ISMT, which is a specialized seamless tube manufacturer.
Following the development, Kirloskar Ferrous zoomed 10 per cent to Rs 206, before paring up some gains to trade at Rs 203.50 at 9.40 am. The scrip had settled at Rs 187.35 on Thursday.
On the other hand, ISMT advanced 5 per cent, its daily circuit limit to 55.50 on Friday. It ended Thursday’s session at Rs 52.90.
At the time of writing this report, the BSE barometer and benchmark were trading 257.41 points or 0.46 per cent higher at 55,721.80.
Kirloskar Ferrous will invest Rs 670 crore in ISMT, out of which Rs 476.63 is for a 51.25 equity stake, valuing ISMT at Rs 930 crore. The balance of Rs 194 crore is an unsecured loan to the tube manufacturer, the companies said in a statement.
The transaction also involves an open offer for acquiring up to 25.05 per cent of ISMT worth Rs 239.7 crore, in accordance with Sebi takeover norms.
The proceeds will be used towards a one-time settlement of ISMT’s loans of about Rs 3,359 crore. With the acquisition of ISMT, KFIL is looking to integrate its iron ore business with seamless tubes at a consolidated level and diversify the current product portfolio with steel and seamless tubes.