Visa Steel Ltd (VSL) on Tuesday signed an agreement with NYSE-listed SunCoke Energy Inc to sell 49 per cent stake in its wholly-owned subsidiary Visa Coke Ltd (VCL). The deal value is Rs 368 crore or $67 million.
The deal, which is being structured by KPMG, would bring in Rs 355 crore to VSL and the balance would go to the equity of VCL, Vishal Agarwal, Managing Director, Visa Steel, told Business Line .
Joint venture
VSL had, on July 27, paved the way for transfer of its metallurgical coke manufacturing asset and associated steam generation units by way of slump sale to VCL. “Now VCL is proposed to become a 51: 49 per cent joint venture between VSL and SunCoke,” Agarwal explained.
The joint venture will have the four lakh tonnes a year heat recovery coke plant and steam generation units under it belt. These were part of the VSL’s Kalinganagar project in Odisha.
According to Rajesh Agarwal, Head of equity research at Eastern Financiers Ltd, the move is principally an exercise in debt reduction.
“It is value accretive for the stock. For the first half of FY13, VSL’s interest cost was Rs 112.55 crore against Rs 45.15 crore in H1FY12,” he pointed out. The deal is subject to approval of the lenders as well as shareholders.
In September, VSL got a corporate debt restructuring package approved, which provided for an initial two-year moratorium and an extended term of repayment for next eight years.
A consortium of banks, led by SBI, is the lending group.
“Since met coke is in high demand, the strategic partnership would also position VCL for better earnings through expertise of SunCoke, the largest independent producer of metallurgical coke in Americas,” the research analyst added.
On Tuesday, the VSL stock ended up 10.5 per cent at Rs 52.65 on the BSE.
jayanta.mallick@thehindu.co.in