Shares of Srikalahasthi Pipes (SPL) and Electrosteel Castings (ECL) tanked up to 18 per cent on the BSE in the intra-day trade on Tuesday after their respective boards on Monday approved a draft scheme of amalgamation for the merger. SPL shareholders will receive 59 equity shares of ECL for every 10 equity shares held in the company.
The stock of SPL tanked 18 per cent to Rs 109.50 on the BSE in intra-day trade and was trading close to its 52-week low price of Rs 90.35 touched on March 25, 2020. Shares of ECL, on the other hand, slipped 11 per cent to Rs 20.60 in the intra-day trade. In comparison, the S&P BSE Sensex was up 0.85 per cent at 39,305 points at 01:17 pm.
"The respective boards considered and approved plan to reorganize the businesses with a view to simplify the group structure, (to become) one listed entity in the group having similar business operations, (and to) consolidate operating manufacturing business into one larger entity," Srikalahasthi Pipes said in a statement.
SPL is engaged in the business of manufacture and sale of ductile iron pipes with backward integrated facilities including sinter plant, coke oven plant and sewage treatment plant. While, ECL is engaged in the business of manufacture and sale of ductile iron pipes and cast-iron pipes and ductile iron fittings.
The management of these companies said the amalgamation will enable the combined entity to leverage their consolidated resources to increase production capacities; undertake research and development initiatives to improve manufacturing processes and final product; serve the needs of a larger customer base leading to overall business domestically as well as overseas, improved alignment of debt repayments with cash flow, and improved credit rating.
The scheme of amalgamation is subject to necessary statutory and regulatory approvals.
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