Ravi Ruia: Taking big strides all the way

Mumbai, June 24: Shares amounting to 14.84 per cent of Essar Steel?s equity have been pledged with Jupiter Capital Advisers, a foreign institutional investor (FII).

The 4.52 crore dematerialised shares ? kept with National Securities Depository (NSDL) ? representing more than a fourth of the promoters? equity were pledged on July 20.

The move comes less than a week after Essar bought Rajeev Chandrasekhar?s stake in BPL?s cellular firms for Rs 4,400 crore.

Essar officials, however, called the pledge of shares ?a financing transaction? and stressed it had nothing to do with the recent acquisition of BPL, which catapulted the company to the number three slot in the mobile telephony business ? after Bharti and Reliance Infocomm.

?The pledge of shares is a financing transaction,? a senior Essar official said when asked about the development. The group, known for its smart management of finances, has been using the buoyancy in sectors where it has a presence to shore up its cash position.

The Ruias are said to control over 50 per cent in their steel company, though a recent restructuring has made those estimates a little fuzzy. Even so, analysts reckon that the figure will not be less than 50 per cent at any point.

The timing of the pledge does make links with the BPL deal appear plausible but company watchers say it could have nothing to do with last week?s landmark buyout. The value of the shares kept with the FII is itself Rs 230 crore, based on Essar Steel?s stock price of Rs 52.05.

The Ruias snapped up BPL Communications in one the largest local telecom deals, with partner Hutchison Whampoa. They have a joint venture with the Hong Kong firm, which was renamed Hutchison Essar Telecom earlier this year.

Merging BPL with Hutch-Essar will, however, need regulatory approval. The group insists it has enough internal resources for the acquisition.

Essar Steel itself has been in the throes of a major restructuring that turned it into a fully integrated steel-maker. This year, it acquired stakes owned by Stemcor of the UK in Hy-Grade Pellets Ltd (HGPL) and Steel Corporation of Gujarat Ltd (SCGL) for Rs 1,950 crore. The share-deal gave the end-to-end control over raw materials, processes, technology and finished products.

Essar Shipping, too, registered a quantum leap in its net profit for the first quarter ended June 30 at Rs 110.37 crore against Rs 30.37 crore same time last year. The figure for April-June 2005 includes a Rs 68.57-crore gain from a fleet sale.

The company sold ageing vessels when the industry was riding the wave of high overseas freight rates. It plans to use the money to renew its fleet.