Vedanta completed the acquisition of ferroalloy maker Facor through an investment of Rs340mn ($4.63mn) in equities and an inter-corporate loan of Rs220.3mn ($3mn) on Monday. The acquisition was done through a resolution plan for Facor. The deal will improve the efficiencies of Vedanta’s existing steel business.
The resolution plan involves non-convertible debentures of Rs2.87bn ($38.98mn) allotted by Facor to its financial creditors. Post the investment on Monday, 340mn fully paid-up equity shares of Facor were allotted to Vedanta and Facor is now a wholly-owned subsidiary of Vedanta.
Facor is a leading producer and exporter of ferroalloys in India. The company is listed on the Indian stock exchange. Ferroalloys are key ingredients used in the production of special steel and stainless steel. The company exports material to Italy, Netherlands, the US, Turkey and Asian countries including China, Japan, Korea and Taiwan.
The company has a chrome plant of 72,000mn mt annual capacity in Orissa and a 100MW captive power plant of 100 MW operated through its subsidiary Facor Power. The company owns two operational chrome mines and is establishing a mining complex at Bhadrak, Orissa for processing chrome ore.
In FY2020, Farco produced of 66,500mt material as against 82,340mt in the prior year, down by 19.24pc. Exports in FY2020 were at Rs1453.2mn compared to Rs1244.1mn in the prior year. Exports formed 49.89pc of the company’s total sales last year. The company profit after tax on a standalone basis was Rs102.81mn and on a consolidated basis was Rs.116.45mn.
Bankruptcy case
Financial Creditor REC Limited initiated the corporate insolvency proceeding against Facor under India’s Insolvency and Bankruptcy Code, 2016 (IBC). REC had Rs5,179mn to Facor’s subsidiary Facor Power Limited, which the company failed to repay. Facor was the corporate guarantor of the loan, hence was liable to pay back the creditor. Vedanta’s resolution plan for Ferro Alloys Corporation Limited (Facor) was approved by National Company Law Tribunal (NCLT) Cuttack on Jan 30.
Vedanta’s steel segment
In 2018, Vedanta acquired Electrosteel Steels which has a 2.51mn mt annual capacity integrated steel plant in Bokaro, Jharkhand. The company produces pig iron, billets, wire rods, TMT bars and Ductile Iron (DI) pipes.
($1=Rs73.49)