German Green Steel booked Rs 19.9603 crore capital reserve

German Green Steel and Power Limited booked a Rs 19.9603 crore capital reserve after obtaining control of German TMT Private Limited on May 21, 2024. German Green Steel paid cumulative consideration of Rs 1.07 crore for a 79.79% holding, while the acquired business had Rs 26.537 crore of identifiable net assets at fair value.

How did German Green Steel gain control of German TMT?

German Green Steel gained control of German TMT on May 21, 2024, when its holding reached 79.79%. During the year ended March 31, 2025, German Green Steel acquired 370,000 equity shares with a face value of Rs 10 each for Rs 37 lakh in cash, taking its total holding to 375,000 shares.

The Rs 37 lakh cash acquisition was part of, rather than the whole of, the acquisition cost. German Green Steel disclosed cumulative consideration of Rs 1.07 crore for the 375,000 shares. The company said this ownership gave it control and required German TMT to be consolidated from May 21, 2024 under Indian Accounting Standard 110, or Ind AS 110.

Ind AS 110 requires an entity that controls another entity to include that entity in consolidated financial information. German TMT was identified as a subsidiary effective May 21, 2024, while Iraqi Enterprise Limited was classified as an associate only until June 20, 2024. A subsidiary’s assets, liabilities, income and expenses are included in group accounts, subject to eliminating transactions within the group.

The acquisition occurred during the year ended March 31, 2025, but the consolidation start date was May 21, 2024 rather than the beginning of that financial year. German Green Steel’s 79.79% ownership left 20.21% outside the parent’s ownership at the acquisition-date reference in the non-controlling-interest disclosure. Non-controlling interest represents the part of a subsidiary attributable to shareholders other than the parent.

Why did German Green Steel book a Rs 19.9603 crore capital reserve?

German Green Steel booked the Rs 19.9603 crore capital reserve because the fair value of German TMT’s identifiable net assets, after non-controlling interest, exceeded the Rs 1.07 crore total purchase price. The acquisition reconciliation reports total assets of Rs 261.1859 crore and total liabilities of Rs 234.6289 crore as of May 21, 2024.

Subtracting Rs 234.6289 crore of liabilities from Rs 261.1859 crore of assets produced Rs 26.537 crore of identifiable net assets. The reconciliation then deducted non-controlling interest of Rs 5.3267 crore and the Rs 1.07 crore purchase price, leaving the disclosed capital reserve of Rs 19.9603 crore. The reserve is therefore an acquisition-accounting residual, not an additional cash payment.

The capital reserve depends on the values in the May 21, 2024 acquisition calculation. It would change if the fair value of the Rs 261.1859 crore assets, the Rs 234.6289 crore liabilities, the Rs 5.3267 crore non-controlling interest or the Rs 1.07 crore consideration changed. The relevant comparison is net assets after liabilities and outside ownership, rather than gross assets alone.

What assets and obligations did German TMT add at acquisition?

German TMT added Rs 121.3189 crore of non-current assets and Rs 129.967 crore of current assets to the acquisition-date fair-value calculation. Non-current assets are generally held or used beyond the normal operating cycle, while current assets are expected to be realised or used within that cycle.

German TMT also had Rs 83.1447 crore of non-current liabilities and Rs 151.4842 crore of current liabilities on May 21, 2024. Current liabilities exceeded non-current liabilities by Rs 68.3395 crore. As a result, the Rs 261.1859 crore total assets translated into only Rs 26.537 crore of identifiable net assets after recognising all stated liabilities.

The Rs 26.537 crore net-assets figure is an acquisition-date balance-sheet measure, not a measure of cash generation. The subsequent subsidiary disclosure reports revenue from operations of Rs 30.6267 crore and profit for the year of Rs 30.1467 crore for the year ended March 31, 2025. Those income-statement amounts are distinct from the May 21, 2024 fair-value calculation used to determine the capital reserve.

How did non-controlling interest and consolidation change the reported mix?

Non-controlling interest reduced the net assets attributed to German Green Steel in the acquisition calculation by Rs 5.3267 crore. The acquisition note states that outside holders owned 20.21% of the subsidiary as of May 20, 2024, immediately before the May 21, 2024 control date.

The subsidiary information separately reports a 22.59% non-controlling-interest percentage at March 31, 2025 and March 31, 2024. It also reports Rs 64.1443 crore of net assets attributable to non-controlling interest at March 31, 2025, Rs 70.10 lakh of profit allocated to it and Rs 78.45 lakh of total comprehensive income allocated to it. These figures are presented for different dates and purposes from the Rs 5.3267 crore acquisition-date allocation.

German Green Steel’s ratio note says the March 31, 2025 and March 31, 2026 ratios are consolidated and include the subsidiary, whereas March 31, 2024 included an associate. The change in reporting perimeter means the three periods are not directly comparable. Return on investment was 13.98% in 2024, 10.47% in 2025 and 12.52% in 2026.

German Green Steel said the return-on-investment change was primarily attributable to the subsidiary acquisition because the increase in profit was lower than the corresponding increase in the asset base. Debt-equity was 1.13 in 2024, 1.18 in 2025 and 0.79 in 2026. The company attributed the 2026 change to repayment of term-loan obligations and an improvement in total equity.

Conclusion

German Green Steel’s Rs 19.9603 crore capital reserve resulted from a defined purchase-accounting calculation. German TMT’s Rs 26.537 crore of identifiable net assets at May 21, 2024, less Rs 5.3267 crore of non-controlling interest and Rs 1.07 crore of consideration, produced the disclosed reserve and brought the subsidiary into consolidated reporting.

The next point to watch is the effect of the enlarged consolidated asset base on later returns and ratios. German Green Steel has disclosed that the acquisition affected return on investment because profit increased by less than assets, and it has also stated that the 2025 and 2026 consolidated ratios cannot be directly compared with the 2024 associate-based figures.