Private equity giant Blackstone Group has picked up another 2.43 per cent stake in Monnet Ispat Ltd, one of India’s largest manufacturers of integrated coal-based sponge iron. The latest round of stake buy came on Friday when the PE major picked up the shares both on the BSE and the NSE for an aggregate sum of Rs 75 crore.
With the recent deals, Blackstone’s stake in the company will go up to more than 6.2 per cent for a total investment of over Rs 200 crore. Blackstone had also invested Rs 275 crore (approximately $60 million) in a subsidiary of Monnet Ispat in the power generation space last year.
The share price of Monnet Ispat was trading at Rs 486.05 on Tuesday morning (August 23), marginally down 0.26 per cent. Blackstone bought into the company at Rs 478.05 per share on the BSE and Rs 484.9 per unit on the NSE.
Blackstone started buying into Monnet Ispat, which was evolving from sponge iron player to an integrated steel firm during last month. CX Partners, a PE firm started by Citigroup Venture Capital International (CVCI) veteran Ajay Relan, had also bought into the Jajodias-run firm from open market last year.
In March, 2011, Monnet had acquired the Indonesian coal company PT Sarwa Sembada Karya Bumi for Rs 108 crore. The deal gives Monnet access to the thermal coal mine, spread over 25,000 hectare, of which only 1,500 hectare have been explored. The company has also stated recently that it is conducting due diligence on two African coal assets, where it expects to spend $50-$60 million and close a deal in the next six months.
Monnet Ispat recently reported 1.6 per cent increase in its net sales to Rs 427 crore, with net profit flat at Rs 73 crore for Q1FY12. The sales increase was mainly driven by 33.6 per cent increase in sponge iron realisation to Rs 19,776/tonne, offset by the decline in sales volumes of sponge iron and power, a report by Angel Broking stated.
“MIL is on the verge of a massive expansion in its steel business. The 80 MW power capacity expansion is expected to drive MIL’s earnings momentum in the near term. However, long-term stock performance will be determined by the timely expansion of the 1.5 mtpa steel plant and unlocking of value in Monnet Power, which is implementing the 1,050 MW power project. Most of these projects would be backed by captive resources,” the Angel Broking report added.