Kirloskar Ferrous Industries, a subsidiary of BSE listed Kirloskar Oil Engines, has acquired a 51.25% equity stake in listed steelmaker ISMT Ltd triggering a 25 % open offer for shares from the public, according to disclosures made to the stock exchange.
On late Thursday night, ISMT announced that Kirloskar Ferrous Industries Ltd would invest Rs 476.63 crore in the preferential shares to be issued by them and provide them with a Rs 194 crore unsecured loan.
ISMT will issue 15.4 crore preference shares to Kirloskar Ferrous Industries at Rs 30.95 per share. As against this, Kirloskar will offer 31.84 per share having a face value of Rs 5 to the public at the open offer. If 25% of equity holders surrender their shares, Kirloskar Ferrous will have to make a Rs 239.7 crore payment, according to disclosures made by ISMT.
In all, Pune based Atul and Rahul Kirloskar promoted Kirloskar Ferrous w Rs 670.63 crore proposed infusion in ISMT is a combination of debt and equity. The proceeds of unsecured loans and the preferential capital will be used to clear financial creditors dues, people with the knowledge of the matter said.
ET had reported on November 1 that Kirloskar Ferrous has offered Rs 670 crore to the creditors to acquire the debt of ISMT. On Thursday, shares of ISMT closed at Rs 34, up 4.9% over the previous day. ISMT has stated that an extraordinary general meeting will be held on 22 December to seek shareholders approval for preferential shares.
Lenders invited bids for their Rs 3359 crore outstanding loans soon after receiving a Rs 670 crore non-binding offer from Kirloskar Ferrous. Rare ARC had submitted an expression of interest for acquiring the loan, but it did not submit a firm bid, one of the lenders said.
Since lenders failed to receive any firm bids, they accepted a Rs 670 crore offer from Kirloskars, the same person said.
Lenders had appointed Desai Saksena & Associates (DSA), a legal firm, to oversee the sale process.
In recent years, Avenue Capital-backed Asset Reconstruction Company of India (Arcil) acquired ISMT’s rupee loans from State Bank of India, Indian Overseas Bank, Bank of Maharashtra, Bank of India and IDBI Bank, while Edelweiss ARC acquire rupee loans from ICICI Bank.
Arcil gained supermajority, holding 67% of the total debt- which is adequate to block a resolution- if the company is admitted to corporate insolvency and resolution process (CIRP). As per the Insolvency and Bankruptcy Code, any major decision under the CIRP must be approved by at least 66% of lenders by value.
The remaining lenders – Bank of Baroda, Union Bank of India, Central Bank of India and IKB Deutsche IndustrieBank AG – continue to have rupee exposure to the company. The company also has foreign currency exposure equivalent to Rs 271 crore, according to its annual report wherein some of the Indian banks have exposure.
Kirloskar Ferrous Industries describes itself as a large casting and pig iron manufacturer while lossmaking ISMT has an integrated specialized seamless tube manufacturing plant in India.
