Sanjay Singal, who runs his privately held firm Bhushan Power & Steel, has acquired 14.7 per cent stake in small sized loss making sponge iron firm Nova Iron & Steel from its promoters the Gambhir family. Baring Private Equity Asia-backed Bhushan Power & Steel picked the stake through open market transaction for Rs 26 crore (~$ 5.8 million).
Singal was earlier also locked in a three way takeover battle for Orissa Sponge & Iron, that is promoted by the Mohanty family along with minority shareholding of the Orissa government. Besides Sanjay Singal, other suitors of Orissa Sponge included Monnet Group and Bhushan Steel & Power. The three suitors also came out with competing open offers.
Although, the Mohantys have publicly struck an agreement with Jajodias of Monnet Ispat for bringing them as a partner, the takeover drama is apparently not over yet.
So this is not the first time Sanjay Singal is looking to acquire a small size firm to boost its business. The question is will he go all the way this time around? This appears likely, since the promoters themselves sold shares to him and it may not become another basket case with a failed hostile takeover.
Nova that clocked revenue of Rs 144 crore with net loss of Rs 4.23 crore for the year ended March 2010, has seen significant slide in business with revenues of less than Rs 3 crore in three straight quarters ending with the three months ended December 2010. It is yet to disclose numbers for the quarter ended March 2011 or for the full financial year. This makes it a ripe acquisition target.
Gambhir family held 58.2 per cent stake (a quarter of this was pledged) in Nova as of March 31, 2011. With the stake sale their holding comes down to 43.5 per cent.
Singal in a television interview has indicated that the bigger plan is to have management control of Nova. This would mean buying more shares possibly through a mix of fresh issue and secondary market purchase from Gambhir family to revive the business and also get a majority control over the listed firm.
Bhushan Power & Steel had revenues of Rs 4,008 crore (~$890 million) with earnings of Rs 255 crore for the year ended March 2010. It had cash and bank balances of around $100 million for FY10.
Nova Iron scrip rose 4.9 per cent to hit the upper price circuit for the day at Rs 12.79, valuing the firm at Rs 119 crore. Investors already smell an impending open offer!