The promoters of JSW Energy have sold a part of their holding to steel manufacturer Ispat Industries, a company earlier controlled by the Mittal family and has been acquired by Sajjan Jindal-led JSW Steel earlier this year. Sangita Jindal, wife of industrialist Sajjan Jindal, sold 1.43 per cent stake in JSW Energy to Ispat Industries in a deal worth Rs 163 crore ($36 million) on Wednesday.
JSW Energy scrip hit an all-time low before inching up marginally to close at Rs 68.75 on Wednesday, valuing the firm at Rs 11,275 crore ($2.5 billion). The deal is interesting as Ispat is not among the most profitable companies around for such treasury operations.
Although it posted a net profit of Rs 70 crore for the quarter ended March 31, 2011, it has losses in its books. In the first half (July-December, 2010) itself, it recorded a net loss of Rs 740 crore. In the preceding two financial years, the company also recorded net losses of over Rs 1,000 crore.
While the deal allows the Jindals to bring down their holding in JSW Energy closer to comply with the minimum public holding norms for listed firms (norms require promoters’ holding to be a maximum of 75 per cent, although there is a time period within which this has to be met), analysts will question the use of a public listed company which is not in the best of health for the transaction.
Recently, billionaire brothers Malvinder and Shivinder Singh also struck a similar deal by selling their majority stake in the country’s diagnostics chain Super Religare Laboratories (SRL) to another public listed group firm Fortis Healthcare. In this case, it could be justified by the fact that both firms are in the healthcare domain and there are some synergies.
