Japan’s Sumitomo is acquiring 5.88% stake in Steel Strips Wheels Ltd for Rs 44.2 crore ($10 million), indicating its plans to strike multiple deals in India even as the Indian firm said it plans to raise more funds through other strategic partners and will cumulatively sell around 15% stake to investors.
Apparently, the market was expecting Sumitomo to strike a bigger deal that could have led to an open offer. Steel Strips Wheels scrip crashed 7% on Friday to close at Rs 414.85 at BSE. The share price had rocketed 67% over the last one month and has risen over six times in the past one year alone, giving it a market cap of Rs 564 crore ($125 million).
The deal will allow Steel Strips Wheels to expand global footprint of its products through Sumitomo besides developing high tensile steel wheel. The money raised would be used for expansion of the Indian firm’s Chennai plant from 2.5 million units capacity to 6 million units besides enhancing R&D activity.
Sumitomo owns Ring Tech, largest steel wheel maker in Japan that already has a technical collaboration with Steel Strips Wheels.
Sumitomo, the third largest Japanese steelmaker, is also in talks to pick a large minority stake in a joint venture with Bhushan Steel to set up a steel plant in West Bengal. The firm is reportedly going to hold 40% stake in a JV with Bhushan Steel and the deal will allow the proposed project to have a capacity of 6 million from 2 million tonne proposed initially.
Sumitomo will join another such partnership by a Japanese and Indian steel firm. Sajjan Jindal-led JSW Steel recently struck a partnership with JFE, Japan.