JSW Steel has announced an open offer to acquire shares of Ispat Industries at Rs 20.54 a share..
The offer to the minority shareholders of Ispat will remain open between February 12 and March 3.
On Tuesday, Ispat Industries agreed to make a preferential allotment of 108.66 crore equity shares of Rs 10 each at Rs 19.85 a share, aggregating an investment of Rs 2,157 crore by JSW Steel.
Pursuant to the completion of the open offer for 64.72 crore shares representing 20 per cent equity share capital, JSW Steel will hold 173.38 crore shares, constituting 53.58 per cent of Ispat Industries which has called for a shareholders' meeting on January 18 to seek their approval.
JSW Steel on Tuesday acquired 41.29 per cent stake in loss-making Ispat Industries, triggering the open offer as per SEBI guidelines. Once approved by Ispat shareholders, JSW Steel will deposit Rs 500 crore as advance payment for the preferential subscription and progressively pay the entire amount.
In 2008, JSW Steel had acquired a pipe mill in the US for $900 million which had recorded an EBITDA of $0.85 million in Q2-FY-11. Currently, JSW has a net debt of Rs 12,000 crore and a net worth of Rs 16,000 crore. It recently deleveraged its balance sheet with Japanese steel major JFE Steel picking up 14.99 per cent stake for Rs 5,200 crore.
TURNAROUND PLAN
Loss-making Ispat has a 3.3 million tonnes HR capacity, backed by 1.6 million tonnes DRI (direct reduced iron) and two million tonnes blast furnace capacities. The company, based at Raigad in Maharashtra, has a capacity utilisation of 80 per cent and generates an EBITDA of Rs 3,150 a tonne. Though Ispat has key raw material backing, it was not able to develop them due to a financial crunch.
JSW has outlined a capex spend of Rs 3,100 crore over the next couple of years to set up a 110-MW captive power plant, implement the 3 mtpa pellet plant, expand steel production capacity from 3.3 to 4 mtpa and a 1 mtpa coke plant.
JSW Steel shares on BSE were down four per cent at Rs 1,159 and Ispat Industries unchanged at Rs 23.60 on Thursday.
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