The Hindu Business Line : Orissa Sponge Iron to issue warrants to promoter, Unitech groups

Kolkata, Aug. 22 Orissa Sponge Iron & Steel Ltd has set in motion its capital raising plan by issuing 70-lakh warrants to a promoter group and company and to a Unitech group company. Orissa Sponge Iron & Steel, which has obtained iron ore mining rights in Keonjhar of Orissa, having an estimated reserve of 130 million tonnes (mt), is preparing to start the mining operation.

The stock today gained 4.75 per cent at Rs 284.4 over the previous day’s close of Rs 271.5. It jumped 21 per cent in a week’s time and 54 per cent in a month’s time along with increased trading volumes.

The company has decided to issue 40-lakh equity share warrants convertible into same number of equity share of Rs 10 to TRFI Investment Pvt Ltd, a promoter group company, at a price calculated according to the relevant SEBI guidelines. It is also issuing 30-lakh equity share warrants convertible into the same number of equity shares to Prakasauli Investment (India) Pvt Ltd, a Unitech group outfit and an existing investor in Orissa Sponge holding 12.11 per cent stake in the total equity of Rs 20 crore. Shareholders’ approval for the warrants issue would be sought through postal ballot.

The company has proposed to set up one million tonne steel plant through electric arc furnace and sponge iron route, the first phase work of which is expected to begin in the next couple of years.

Exploratory Work

Dr P.K. Mohanty, Vice-Chairman and Managing Director, told Business Line that after obtaining forest clearance permission, which was expected shortly, exploratory work in the ore mining area could begin some time in the March to June quarter of 2009.

The company has also received coal-mining rights in Talcher in Orissa with an estimated reserve of about 125 mt. Orissa Sponge currently has a capacity of 2.5 lakh tonne and the loss-making company is showing signs of turnaround this year after reporting net profits in two consecutive quarters.

Dr Mohanty said the Unitech is a financial investor in the company, which still did not represent itself on the board of Orissa Sponge. “By letting Unitech increase its investment in Orissa Sponge, it is not been intended to make the steel company a joint venture,” he clarified.

Joint promoter

Unitech group, since inception of Orissa Sponge has been an investor. Unitech Ltd, in the beginning, had invested more than 7 per cent in the then paid-up capital as a joint promoter. Later on, the investment was transferred to Unitech Holding, which raised its stake, but became part of the public shareholders. Currently, the group’s holding is reflected through Prakasauli.

TRFI at present holds 9.8 per cent stake in Orissa Sponge. The Orissa Government has offloaded its stake. IDFC now holds around 5 per cent, while Quantum Mauritius has 6.31 per cent. Mr B.B. Singhal and his associates hold little over 5 per cent. The company has also proposed to delist the stock from the Calcutta Stock Exchange.

More Stories on : Preferential Allotments | Steel | Mining & Quarrying | Unitech Ltd

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