The stock closed at Rs 16.38 a share on the BSE on Friday, up from Thursday’s close of Rs 13.65.
VISA Bao, in which VISA Steel holds a 65 per cent stake and Baosteel 35 per cent, was set up in 2008 to build a ferrochrome plant in Odisha.
The company said in a filing to the exchange that every ferrochrome producer should have a captive chrome ore mine or a captive power plant to have sustainable growth. Hence the decision to consolidate the ferrochrome business of VISA Steel and VISA Bao, it added.
VISA Steel currently produces 60,000 tonnes of ferrochrome, which can be scaled up to 120,000 tonnes. Further, it has a 75-Mw captive power plant and has secured prospecting licence for chrome ore in Manipur.
On the other hand, VISA Bao is setting up a ferrochrome plant with four submerged arc furnaces at Kalinganagar Industrial Complex in Odisha. Two were commissioned in June 2013 and the remaining were expected to be commissioned in 2015-16 and 2016-17.
VISA Steel had announced its merger plan first in August 2015. According to the company, the amalgamation would result in a five per cent stake for Baosteel Resources in VISA Steel. “We already have Baosteel has a partner. This move will help us consolidate the ferro chromebusiness,” VISA Steel Vice-Chairman and Managing Director, Vishal Agarwal, said.
As part of its efforts to bring down the overhead cost, VISA is shifting its registered office from Odisha to West Bengal.
The company said that since the corporate office was in West Bengal, it was more expensive and cumbersome to deal with regulatory authorities and courts in Odisha. The move was also to bring in greater administrative efficiency and reduce overhead costs.
Both the initiatives were an effort to bring in cost efficiencies. In September 2015, the Joint Lenders Forum decided to invoke strategic debt restructuring norms after an earlier restructuring exercise failed to deliver the desired results. VISA’s debt in FY15 stood at Rs 3,375 crore.
The main problems were lack of any free cash flow and losses on account of higher interest rate, lower margins and volume impact.
VISA had also initiated discussion with lenders on a conversion package to allow it to bring in a strategic investor in its special steel business. “We are awaiting court order for transfer of the business,” Agarwal said.