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Jindal Stainless (Hisar) fixes record date for merger with JSL; stock up 3%.

Shares of Jindal Stainless (Hisar) (JSHL) hit a record high of Rs 504.55 as they gained 3 percent on the BSE in Friday's intra-day trade after the company fixed March 9, 2023, as the record date for merger with Jindal Stainless (JSL). The stock surpassed its previous high of Rs 494.95 on February 3, 2023.


"The board has decided to fix Thursday, March 9, 2023, as the Record Date to determine the entitlement of the company's equity shareholders for the issue of equity shares of the JSL under the Part B of the Composite Scheme," JSHL said in an exchange filing.


JSHL Board approved the merger of JSHL into JSL with a swap ratio of 1: 1.95. For each share held in JSHL, a shareholder will get 1.95 shares of JSL. The appointed date for the deal was April 1, 2020, and it is likely to conclude in FY2023.


 Meanwhile, shares of JSL gained 1.5 percent on the BSE in the intra-day trade today and hit a high of Rs 274.75. The stock hit a record high of Rs 275 on February 22, 2023.

On the rationale behind the merger, the company said the merged entity - JSL, as an Indian MNC, would enter the league of top 10 global stainless steel producers. This would also pave the way for consolidating the stainless steel business into one entity with a total capacity of 1.9 million tonnes per annum (MTPA). Merger with JSL will help reduce complementing strengths with more robust financial positioning, JSHL said.


Meanwhile, in the past six months, the stock price of JSHL (up 104 percent) and JSL (up 118 percent) have more than doubled at the bourses. The S&P BSE Sensex was up 1.2 percent during the period.


According to analysts at ICICI Securities, JSL is at the cusp of profitability/volume improvement, mainly on commissioning new capacity (1.0mntepa) and removal of export duty. Furthermore, the acquisition of JUSL (Jindal United Steel Ltd) will likely improve margins by ~Rs 4,000/t.


"Taking cognizance of regulatory overhang being removed, we raise our valuation multiple by 10 percent to 5.5x. We also raise JSL's (standalone) FY24E volume to 1.4mnte (earlier 1.1mnte) led by better avenue for exports and improving domestic potential," the brokerage firm said in a report. The stock, however, is trading above its target price of Rs 270 per share.