Bhushan Steel offer heats up battle for Orissa Sponge

The battle for corporate control of Orissa Sponge Iron and Steel is getting hotter with Bhushan Steel, controlled by Neeraj Singhal, last week making an open offer for Rs 330 a share in a bid to acquire 20 per cent of the stock.

The Delhi-based Monnet Ispat & Energy, through its group company, Everest Trading & Investment, has also made a bid at Rs 310 a share. It owns 14.9 per cent. And Sanjay Singhal, the estranged brother of Neeraj Singhal, has made a separate bid of Rs 300 a share to acquire 26 per cent of the stock through a company that he controls, Bhushan Energy.

The Monnet group, through an earlier negotiated deal, had acquired 27 per cent stake from the promoter of Orissa Sponge, PK Mohanty. In return, it is to name three nominees to the board.

However, this has to wait till the closure of the open offer. Till then, the board can’t be reconstituted, says a banker involved in the transaction.

At stake are the sponge iron and steel billet manufacturing units of Orissa Sponge and its captive reserves of iron ore and coal.

It is expected that the bidders will be revising their open offer price. The final date for doing so is May 4.

Bhushan Steel had acquired 14.8 per cent of the existing paid-up capital of 200 million shares of Rs 10 face value. It had also acquired another 35 lakh warrants. On conversion of these warrants, Bhushan Steel’s stake in Orissa Sponge will increase to 21.5 per cent.

If Bhushan manages to increase its holding to beyond 26 per cent through the open offer, it will be a major victory for it, according to an investment banker involved. Once that happens, he noted, Bhushan Steel “would be in a position to veto any special resolution such as raising funds through equity and other routes,” he added.

Meanwhile, individual investors have filed complaints with the market regulator, the Securities and Exchange Board of India (Sebi), for alleged violation of the takeover code.

BEK Trading Co, an investor in Orissa Sponge, has alleged that Mohanty raised his stake to 57.76 per cent in January 2006 from 53.54 per cent through a warrant conversion without any public announcement, which is a must in case the promoter stake goes beyond 55 per cent. It is alleged that the promoters then went on to breach the code again by taking their holding to a further 69.31 per cent through another warrant conversion.

On the other hand, an investor, VP Chhabra, has complained that Bhushan Steel, along with a person acting in concert, has already acquired more than 14.8 per cent in the company without disclosing it to the regulator. However, a Bhushan Steel official denied this, saying it has acquired only 14.8 per cent and made the open offer to increase this further.