Piombino Steel holders to get 10 JSW Steel shares per 156

Piombino Steel Limited shareholders, excluding JSW Steel Limited and its nominees, are to receive 10 fully paid JSW Steel shares for every 156 fully paid Piombino Steel shares held on the record date. The scheme specifies that the new Re. 1 shares will be issued in dematerialised form and listed, subject to stock-exchange directions.

What is the Piombino Steel share exchange ratio?

Piombino Steel shareholders are to receive 10 fully paid JSW Steel equity shares for every 156 fully paid Piombino Steel equity shares. Clause 7.1 applies the ratio to shareholders recorded in Piombino Steel's register of members or depository records on the record date, while excluding JSW Steel and its nominees from the allotment.

The stated consideration is a share exchange rather than a cash payment. Each new JSW Steel share has a face value of Re. 1, compared with a face value of Rs 10 for each Piombino Steel share used in the 156-share entitlement. The scheme fixes the exchange at 10 shares for 156 shares and does not describe it as an exchange based on the companies' nominal share values.

The scheme calls the securities issued under clause 7.1 the Transferee Company New Equity Shares. Their issue and allotment are integral to the amalgamation and are deemed to be made under the Tribunal's orders once the scheme takes effect, without a further corporate act by JSW Steel or its shareholders.

The 10-for-156 ratio may change if either Piombino Steel or JSW Steel alters its share capital before the effective date through a share split, consolidation or another corporate action. In that event, the scheme provides for an adjustment to the entitlement ratio without a separate approval from shareholders or an appropriate authority.

How will Piombino Steel fractional entitlements be treated?

Piombino Steel may produce fractional JSW Steel share entitlements for holders whose positions are not exact multiples of 156 shares. The supplied text on page 25 identifies that situation, but the operative wording explaining how a fraction will be resolved is not legible in the provided extract.

The available text therefore does not establish whether fractional entitlements will be rounded, aggregated, sold or settled in cash. It does establish that the proportional 10-for-156 entitlement applies to eligible holdings on the record date, meaning a holding outside a multiple of 156 can create a fraction.

Piombino Steel shares held in abeyance under Section 126 of the Companies Act will have their corresponding JSW Steel shares held in abeyance. Those shares will remain pending allotment or resolution of the relevant dispute through a court order or otherwise, rather than being allotted immediately.

Piombino Steel shares in an unclaimed suspense account or suspense escrow demat account will receive corresponding JSW Steel shares in JSW Steel's unclaimed suspense account or suspense escrow demat account, as applicable. A demat account holds securities electronically, consistent with the scheme's requirement that the new shares be issued in dematerialised form.

Will the new JSW Steel shares be listed and tradable?

The new JSW Steel shares are intended to be listed and admitted to trading on the stock exchanges, but they will initially be frozen in the depositories' system. The freeze remains until the stock exchanges give relevant directions relating to listing or trading.

This creates a sequence in which eligible Piombino Steel holders receive shares under the 10-for-156 ratio, followed by listing and trading action directed by the stock exchanges. The supplied pages do not disclose dates for the record date, effective date, listing admission or removal of the depository freeze.

The new shares will be governed by JSW Steel's memorandum of association and articles of association. The scheme also states that member approval of the amalgamation is deemed to be consent for the issue and allotment of the new equity shares under the applicable provisions of the Companies Act.

The share issue does not alter the terms of JSW Steel's non-convertible debentures, or NCDs, according to the scheme. NCDs are debt instruments that do not convert into equity, and the document says their terms and conditions will remain unchanged as a result of the amalgamation.

What happens to Piombino Steel after the amalgamation?

Piombino Steel will be dissolved without winding up once the scheme becomes effective. Its board and board committees will be discharged, while its assets, liabilities, permits, contracts, taxes and legal proceedings are intended to transfer to, or continue with, JSW Steel under the scheme.

Pending suits, appeals, arbitral matters and administrative proceedings involving Piombino Steel will not abate or be discontinued because of the scheme. From the effective date, JSW Steel may continue, prosecute or enforce such matters by or against it in the same manner and to the same extent as they could have been pursued by or against Piombino Steel.

Piombino Steel employees will become JSW Steel employees without interruption in service and on terms no less favourable than their existing terms. Prior service will count towards existing benefits including retrenchment compensation, gratuity and other retirement or terminal benefits, although access to JSW Steel employee schemes or stock options is not automatic unless JSW Steel decides otherwise.

JSW Steel will account for the amalgamation using the pooling of interest method under Appendix C of Indian Accounting Standard, or Ind AS, 103, covering business combinations under common control. Piombino Steel assets and liabilities will be recorded at carrying values appearing in JSW Steel's consolidated financial statements, and comparative information will be restated as if the merger had occurred from the beginning of the comparative period.

How will the scheme change JSW Steel's authorised capital?

The scheme will combine Piombino Steel's authorised share capital of Rs 17,000 crore with JSW Steel's authorised share capital when it becomes effective. Following the combination, JSW Steel's authorised share capital is stated as Rs 27,980 crore, subject to adjustment if either company's authorised capital changes before the effective date.

The stated Rs 27,980 crore comprises 19,030 crore equity shares of Re. 1 each and 895 crore preference shares of Rs 10 each. The scheme provides for the relevant capital clause in JSW Steel's memorandum of association to be amended under Sections 13, 14, 61, 64 and 232 of the Companies Act.

No separate shareholder resolution is required for this capital amendment under the scheme because approval of the scheme is deemed to include approval for the amendment. Stamp duty and fees previously paid on Piombino Steel's authorised capital are to be applied to the increase, with no additional stamp duty, registration fee or filing fee required to that extent.

The accounting treatment also cancels inter-company balances, securities, warrants, loans and contracts between Piombino Steel and JSW Steel. JSW Steel's investment in Piombino Steel will be cancelled, while an amount equal to the nominal value of the new shares issued under clause 7.1 will be credited to JSW Steel's share-capital account.

Conclusion

The scheme gives eligible Piombino Steel holders a defined entitlement of 10 JSW Steel shares for every 156 Piombino Steel shares on the record date. It also provides for dematerialised issuance, eventual listing, transfer of Piombino Steel's operations and obligations to JSW Steel, and a stated Rs 27,980 crore authorised capital for JSW Steel after the combination.

The next disclosed steps to watch are the record date, the effective date and stock-exchange directions governing listing and trading after the initial depository freeze. The treatment of fractional entitlements remains unresolved in the supplied extract because page 25 does not preserve the mechanism that follows the reference to a fractional new share.