India’s third largest steel maker JSW Steel has entered into an agreement with Ispat Industries Ltd, controlled by Pramod and Vinod Mittal, the brothers of billionaire Lakshmi Mittal, to purchase shares worth Rs 2,157 crore on a preferential basis at a price of Rs 19.85 a piece. Following this deal, JSW will become the promoter of debt-laden Ispat Industries.
“JSW Steel Ltd will subscribe on a preferential basis to 10,866,49,874 (108.66 crore) equity shares at an aggregate consideration of Rs 2,157 crore at a price of Rs 19.85 per share in the company and make an open offer as required under applicable regulations,” Ispat said, in a filing to the BSE.
"Pursuant to the subscription-cum-shareholders agreement, JSW shall become a promoter of the company,” the filing added.
“The name of the Company is proposed to be changed incorporating the name of both the major shareholders,” it said.
But the BSE data didn’t mention the stake JSW Steel will hold in the company after the transaction. But, according to various reports, it could be close to 45%. JSW top management has called for a press conference at Mumbai today afternoon to divulge more details of the deal.
JSW Steel, in its filing, said that the company has to make a mandatory open offer for the shares of Ispat under the SEBI regulations.
On Monday, the debt-ridden Ispat received a letter from IDBI, one of its lenders, saying that the bank decided to convert a part of its loan to equity which would be a sum of Rs 135 crore. But there are reports that both parties are in talks with the bank to resolve the issue. IDBI’s total loan to the company is Rs 250 crore.
JSW Steel had made an offer to Ispat’s corporate debt restructuring (CDR) lenders including IDBI Bank, ICICI Bank and IFCI.
In November, a consortium of lenders led by IFCI Ltd had increased its stake in the company after the steel maker failed to repay loans. The three lenders—IFCI, ICICI Bank Ltd and IDBI Bank—increased their stake by around four percentage points to 10% following Ispat’s inability to clear payments of Rs 77 crore.
Ispat had outstanding debt of Rs 7,156 crore as of June 30 and had shut down its plant in Dolvi, Maharashtra due to the financial crisis. The company had borrowed most of the money to build this plant.
Last month, there were various reports that Laxmi Mittal, who controls the largest steel maker Arcelor Mittal, would invest in Ispat. But Ispat later denied any such developments.
At the time of posting this report, the share price of Ispat is at Rs 21.70, a 3.25% down from Monday’s closing price while JSW is at Rs 1212.55, a 2.3% up from Monday’s closing.