Kalpataru Power announces plan to merge subsidiary as it eyes large EPC projects

• The combined entity will be one of the largest EPC companies in India with an estimated order book visibility (including L1) in excess of Rs 37,000 crore
• The merger will enhance potential to drive further organic growth in core businesses by targeting large size projects, sectoral global expansion and enhanced competitiveness

New Delhi: Kalpataru Power Transmission has announced the plan to merge its subsidiary JMC Projects with itself in order to benefit from the synergies that exist between the two companies, create a strong balance sheet and bid for larger projects. In a statement on Saturday, the company said, "The Board of Directors of Kalpataru Power Transmission Ltd (KPTL) and JMC Projects (India) Ltd (JMC) in their respective meetings held on 19th February 2022 have approved the scheme of amalgamation which inter alia provides for the merger of JMC with KPTL (Scheme). 

"This merger brings together two leading organisations with unique sets of capabilities and complementary businesses in the current attractive EPC markets. The merger will accelerate growth and enhance value creation for all stakeholders. Pursuant to the Scheme, JMC's shareholders (other than KPTL) will be allotted one share of KPTL against every four shares held by them in JMC," said Kalpataru Power Transmission.

Merged entity will be one of India's largest EPC company: Kalpataru Power

"The combined entity (post-merger) will possess a sectorally diversified portfolio of engineering and heavy construction capabilities, thereby creating one of the largest EPC companies in India with an estimated order book visibility (including L1) in excess of Rs 37,000 crore. This entity will be present across all high growth sectors, with significant capital allocation across government spend in the year(s) to come," said the statement.

The merger will also enhance KPTL's business portfolio and pre-qualifications by JMC's expertise in civil works business. At the same time, JMC will be able to leverage KPTL's expertise, global business access and financial flexibility, to pursue value-creating opportunities by expanding the current business and bid for large-size infrastructure projects. The merger will drive immense operational synergies and cross learnings, thereby improving competitiveness to increase scale and relevance both in India and international EPC markets, said the statement.

Post-merger, the combined entity will comprise of several high-growth businesses with leadership positions in T&D, B&F, Water, Railways, Oil & Gas Pipeline and Urban Infra, which provides balanced earnings visibility and a resilient portfolio. The combined entity will be able to drive a lot of operational synergies and scale effectiveness in areas like procurement, supply chain and technology. Additionally, synergies will be achieved from the increased scale of the new organisation, the sharing of best practices and cost reductions, said the company.

Further, the combined entity can maintain a strong balance sheet and credit profile, which has the potential to optimise liquidity and reduce cost of financing, leading to better profitability. The success and scale of the combined business ensures funding capacity and flexibility for simultaneous investment in core business, debt reduction and capital return to shareholders. Our ethos of adopting a prudent approach towards maintaining a strong balance sheet, profitability focus, growth and industry leading credit profile will continue to be a force to reckon with, said KPTL.

KPTL to become $3 bn revenue organisation by 2025

Commenting on the development, Manish Mohnot, Managing Director & CEO, KPTL said, "The merger of KPTL and JMC is a significant milestone for all of us, as both the entities come together to drive the next phase of growth and value creation. The combined businesses present a significant opportunity to increase scale and relevance both in India and international EPC market. KPTL has strong domestic and overseas presence with strong balance sheet and financial flexibility, while in high-growth civil business verticals, JMC provides a strong platform which is highly complementary to KPTL's strengths. KPTL and JMC will leverage each other's respective capabilities to create value for both our shareholders through a successful combination of our franchises. KPTL will continue with its efforts to divest non-core investments in order to strengthen its balance sheet. We will drive a vision of being a USD 3 billion revenue organisation by 2025, with strong balance sheet and stable margins." 

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