Steel major JSW Steel's proposed over Rs 1,000 crore deal to acquire sponge iron maker Welspun Maxsteel has got the approval from the Competition Commission.
According to the fair trade regulator the proposed deal is "not likely to have an appreciable adverse effect on competition in India."
On August 18 this year, JSW Steel had entered into a 'Share Purchase Agreement' with Welspun Enterprises to acquire entire shareholding of Welspun Maxsteel. Welspun Maxsteel is promoted by Welspun Enterprises.
The deal involves acquisition of entire stake of Welspun Maxsteel from Welspun Enterprises, including the equity shares held through its affiliates.
In a recently released order, the Competition Commission of India (CCI) observed, among others, that sponge iron industry in India had the presence of large number of players and the market share of Welspun Maxsteel in production of sponge iron is "insignificant".
It also noted that "JSW Steel has purchased a limited quantity of sponge iron from Welspun Maxsteel mostly for captive consumption."
"However, the same constitutes an insignificant proportion of the overall purchase of sponge iron by JSW Steel in India," the fair trade regulator said.
Going by details in the order, JSW Steel makes steel products with facilities located at Vijayanagar (Karnataka), Salem (Tamil Nadu) and Dolvi (Maharashtra). It also produces sponge iron which is mainly used for captive consumption in its facility at Dolvi in Raigad district of Maharashtra.
Meanwhile, Welspun Maxsteel manufactures sponge iron at its production facility located in Raigad district of Maharashtra.
In a statement, JSW Steel had said that it would acquire the shareholding of Welspun Maxsteel held by Welspun Enterprises "for an enterprise value of Rs 1,000 crore plus net current assets."
Further, the steel major had said that Welspun Maxsteel was in close proximity to its Dolvi unit, offering complementary infrastructure and location to augment the current envisaged expansions.
The entities had approached the fair trade regulator for its approval on August 20.