SS Steel, a newly listed company, plans to acquire Saleh Steel Industries with the view to staking a larger claim on the Tk 55,000 crore-industry, in yet another indication of the impending recovery of the Bangladesh economy from the fallout of the global coronavirus pandemic.
The 19-year-old steelmaker will invest a total Tk 158.75 crore in Saleh Steel. Of the sum, Tk 24.75 crore would be equity investment for its 99 percent stake. Another Tk 134 crore would be invested for the smooth operation of the company.
Established in 1995, the capacity of the Saleh Steel Industries, which churns out a range of mild steel (MS) rods and coils, is about 84,000 tonne per year.
The new investment alone is expected to increase SS Steel's turnover by about Tk 500 crore a year, which can potentially increase the profitability of the company substantially, it said in a posting on the website of the Dhaka Stock Exchange.
In the 2018-19 financial year, SS Steel's turnover was Tk 415 crore and profit Tk 51.91 crore, up 69.7 percent year-on-year. In the first half of the 2019-20 financial year, its profit stood at Tk 32.3 crore.
"We are acquiring Saleh Steel as it has great potential and great brand value," said Md Mostafizur Rahman Sazzad, company secretary of SS Steel.
And the price was reasonable, too.
"So, we have decided to buy," Sazzad added.
Contacted, Anamul Hoq Iqbal, managing director of Saleh Steel, said: "We wanted to sell and they also agreed to meet our price, so the deal is going ahead."
He declined to elaborate further.
The news sent the stock price of SS Steel, listed with the Dhaka bourse in 2019, up 1.85 per cent to Tk 11 yesterday.
Located in Tongi on the outskirts of Dhaka, SS Steel manufactures MS deformed bar of various grades, MS billet and ingot. It also produces MS Billets from scrap.
The invested amount would be financed by the company and partly from taking share money deposit from directors.
Its paid-up capital in the 2018-19 financial year was Tk 245 crore. Now, it is Tk 281.75 crore.
The steelmaker has a reserve and surplus of Tk 167.21 crore, according to the data from the Dhaka Stock Exchange.
SS Steel is yet to take consent from its shareholders and the related regulators. Sponsors hold 32.3 percent of SS Steel's shares, institutes 19.96 percent and public 47.71 percent.
The country has about 40 active steel manufacturers, who altogether can manufacture 9 million tonnes of steel annually. Of them, Abul Khair Steel, GPH Steel, BSRM and KSRM meet more than half the yearly demand of about eight million tonnes.