JSW Steel Ltd, India's third largest steel manufacturer, has sold 14.99 per cent stake in the company to JFE Holding Inc, Japan's second largest and world's fifth largest steel producer, for over Rs 4,800 crore, a move that will help the Indian steel major reduce high debts in its books. JSW Steel currently has debt of Rs 17,700 crore as on June 30, 2010, with 1.7:1 as consolidated net gearing.
JFE and JSW agreed in November 2009 on a strategic tie-up with details including share holdings to be decided later. While the 14.99 per cent stake won't give JFE a control over JSW's management, the investment will cement a partnership that will give the Japanese steel maker way to tap the Indian market without building its own mills. The company expects debt to equity to be 0.5:1 post the deal. The deal with JFE will also bring technology that JSW is looking for as India grows.
According to the subscription agreement JFE has decided to make an initial investment of more than Rs 4,800 crore in JSW steel. However, if JSW's market price exceeds Rs 1,365 per share for at least five consecutive trading days until Aug. 31, JSW would issue 32 million shares to JFE at a conversion price of Rs 1,500 a share. However, if the share price remains below the Rs 1,365 level until August 31, JSW would issue one fully convertible debenture with a face value of Rs 4800 crore. The fully convertible debentures to JFE Holdings that can be converted into equity shares at conversion price of Rs 1,500 per share in 18 months. However, the conversion price will depend on the market price of JSW shares.
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| Company Name | CMP |
|---|---|
| Tata Steel | 141.00 |
| JSW Steel | 948.95 |
| SAIL | 111.20 |
| Jindal Stainless | 659.65 |
| Jindal Saw | 301.60 |
| View more.. | |
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