JSW Steel to buy Welspun Maxsteel for about Rs. 1,100 crore.

JSW Steel, India's third-largest steel maker, will acquire smaller rival Welspun Maxsteel for about Rs. 1,100 crore, two people with direct knowledge the development said, in a move aimed at sourcing cheaper raw material, cutting production cost and strengthening its presence in the northern and western markets.

Both companies have signed a MoU last week after a financial due diligence by consulting services firm EY, one of the persons said. The deal will help JSW cut production cost by supplying surplus raw material to make sponge iron cheaper.

At present, Welspun buys raw material from the global market, forcing it to sell sponge iron at the cost price in the market. 'JSW is expecting to cut production cost by Rs. 2,500 a tonne. The current production cost stands at Rs. 24,000 per tonne,' the second person said. 'The buyer will do the operational due diligence.'

ET