The Telegraph
Since 1st March, 1999
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Essar plans preferential issue

Mumbai, Jan. 1: Essar Steel plans to go in for a preferential issue of $500 million to acquire Stemcor's 51 per cent stake in Hygrade Pellets (HGPL) and 100 per cent in Steel Corporation of Gujarat Ltd.

The company will hold an extraordinary general meeting (EGM) on January 15 to seek shareholder's nod for the preferential issue.

The meeting will authorise its board to issue and allot convertible preference shares, convertible debentures, foreign currency convertible bonds, depository shares or any other instrument for a total amount of $500 million, Essar Steel informed the stock exchanges today.

The Mauritius-based Prime Holdings Ltd, a promoter holding company, will be allotted shares worth $375 million or an amount not exceeding 75 per cent of the total issue, whichever is lower.

The other allotee will be Asia Steel Holdings of Mauritius, a non-promoter private investor, for an amount of up to $125 million.

At the EGM, the company will also seek shareholders' nod to increase the authorised capital from the existing Rs 5000 crore to Rs 7275 crore by adding 6.50 crore redeemable convertible preference shares of Rs 350 each aggregating to Rs 2275 crore.

The meeting will also seek shareholders' nod for the acquisition of Stemcor's stake in Hygrade Pellets and in Steel Corporation of Gujarat .

Essar Steel had announced the acquisition last month. It is expected that the takeover will allow Essar Steel to wholly control the 4-million-tonne Hygrade Pellets plant where Stemcor owns 51 per cent. The pellets are the principal raw materials fed into Essar Steel's sponge iron plant in Hazira.

With the acquisition of the stake in SGCL, Essar will be able to control the entire chain of value-added steel products.

Earlier, Essar Steel was in the red due to a downturn in the industry. The company has since then staged a turnaround with fortunes of the industry looking up due to strong demand at home and abroad.

The company has announced plans to expand its pellet making capacity in Vishakhapatnam from the existing 4 million tonnes to 7 million tonnes.

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