Srikalahasthi Pipes, Electrosteel Castings plunges to 18% after merger
Shares of Srikalahasthi Pipes (SPL) and Electrosteel Castings (ECL) fell as much as 18% on BSE in intraday trading on Tuesday after their respective boards approved a draft merger plan for the merger on Monday. SPL shareholders will receive 59 ECL shares for every 10 shares held in the company.
SPL’s stock fell 18% to Rs 109.50 on BSE in intraday trading and was trading near its 52-week low price of Rs 90.35 hit on March 25, 2020. ECL, on the other hand, slipped. 11% at Rs 20.60 in intra-day trade. In comparison, the S&P BSE Sensex was up 0.85% to 39,305 points as of 1:17 p.m.
“The respective boards have reviewed and approved the business reorganization plan with a view to simplifying the group structure, (to become) a listed entity in the group with similar business activities, (and to) consolidate the manufacturing activities into one. single larger entity, ”Srikalahasthi Pipes said in a statement.
SPL is engaged in the manufacture and sale of ductile iron pipes with integrated upstream facilities including sinter plant, coke oven plant and sewage treatment plant. While, ECL is engaged in the manufacture and sale of Ductile Iron Pipe and Ductile Iron Pipe and Fittings.
The management of these companies said that the merger will allow the combined entity to leverage their consolidated resources to increase production capacities; undertake research and development initiatives to improve manufacturing processes and the end product; meeting the needs of a larger customer base leading to global operations at home as well as abroad, better alignment of debt repayments with cash flow and a better credit rating.
The proposed merger is subject to the necessary legal and regulatory approvals.