The Hindu Business Line : Jindals to consolidate stake in JSW Steel

Future plans
JSW has embarked upon a 1.3-mt crude steel expansion project, which will be fully operational by September. The converter shop, coke oven and sinter plant have already been commissioned, while the blast furnace will begin production by the end of this month.

Mumbai , July 25

Takeover fears continue to sweep across the domestic steel firmament.

After Tata Steel, it is now the turn of the promoters of JSW Steel Ltd to consolidate their holdings in the company to a "reasonable comfort level" of 50 per cent in order to ward off any threat of takeovers. The promoter holding in the company was 45.15 per cent as on June 30, 2006.

The company's board, which met on Tuesday, approved allotment of 1.5 crore warrants to the promoter group, subject to the approval of shareholders, for which an extraordinary general meeting of shareholders has been scheduled on September 8.

The warrant holder has the option to convert 70 lakh warrants into equity shares of the company on or before March 31, and the balance 80 lakh warrants between April 1, 2007 and March 22, 2008. The pricing and other terms of the issue will be as per SEBI guidelines.

On conversion of 70 lakh warrants, the promoter holding will increase to 47.49 per cent, which will further go up to 49.93 per cent on conversion of the balance 80 lakh warrants. The proposed preferential allotment is an upshot of the present environment of mergers, acquisitions and takeovers in the steel industry world over.

Talking to presspersons, Mr Sajjan Jindal, Vice-Chairman and Managing Director of the company, said JSW Steel had achieved financial closure for its proposed expansion in steel capacity by 2.8 mt per annum. The Rs 5,000-crore expansion will be financed through Rs 3,000 crore debt and Rs 2,000 crore cash accruals.

"The company achieved financial closure with financing the entire debt of Rs 3,000 crore through rupee debt of Rs 1,980 crore, foreign currency loan of $75 million and advance of $150 million against future exports. The company has kicked off implementation of its expansion project, starting to place orders for all critical equipment," Mr Jindal said, adding that the project would be commissioned in 2008-09.

JSW has also embarked upon a 1.3-mt crude steel expansion project, which will be fully operational by September. The converter shop, coke oven and sinter plant have already been commissioned, while the blast furnace will begin production by the end of this month.

Mr Jindal said the company plans to shut down its pellet plant in order to expand its capacity by 0.8 mt.

"This is planned to be done in August this year, due to which the built up inventory of pellets is steadily increasing by cutting down outside sales," he said. This expansion will be wrapped up by September this year, which would shore up its volumes in the second half of this financial year.

To a question on the steel market, Mr Jindal said the demand remained buoyant in India and overseas markets. "However increased volume of exports of steel products from China and drop in domestic prices of steel in the Chinese market are likely to exert some pressure on steel prices in the short term," he pointed out.

Net declines

The company has reported a net profit of Rs 170.30 crore in the first quarter of the current fiscal, as against Rs 200.36 crore in the corresponding quarter of the last fiscal.

During the quarter, its net sales touched Rs 1,569.37 crore, as against Rs 1,538.81 crore in the first quarter of the last fiscal, representing a 2 per cent rise. This was despite a 37-day shutdown of its hot strip mill during the quarter.

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