Grasim Industries, which is the flagship of the AV Birla Group, declared on Tuesday, June 10, that it has sold off its sponge iron business Vikram Ispat at Rs 1,030 Crore to Welspun Power and Steel. In a recent statement, Grasim has stated that it will transform the Vikram Ispat undertaking into a new special purpose vehicle (SPV) and it will act as a subsidiary company to Grasim. The Welspun Power and Steel will fund the SPV in the form of equity investment and induction of debt in order to acquire it and the sponge iron business.

 

The Indian producers use sponge iron to make steel and it is also used as substitute for steel melting scrap. About 16.28 million tonne of sponge iron was produced in India in 2006-07. The plant of Grasim, on the other hand, was a standalone unit without steel-making capacity. Another problem was gas availability which affected the plant’s production due to irregular supplies. It was in 1993 that Grasim custom-built the sponge iron business and a plant was set up at the Raigad district of Maharashtra. Vikram Ispat generated sales of Rs 50 Crore during FY08.