Citi arm to buy 14.8% stake in Monnet Ispat

CVC International, a Citigroup arm, is acquiring a 14.8 per cent stake in the Jajodia family-promoted Monnet Ispat Ltd for Rs 35.27 crore.

The company's board of directors, in its meeting held here yesterday, approved the allotment of 35,27,373 equity shares of Rs 10 each at a premium of Rs 90 per share to CVC International.

The board also cleared the proposal for allotment of 20,00,000 convertible warrants representing one equity share each to the promoters of the company at a total price of Rs 120 per warrant to be converted into equity shares within 18 months from the date of subscription to the warrants.

Both the proposals are subject to the approval of the members at an extra-ordinary general meeting scheduled to be held on January 27, 2004.

"There is a lock-in period of one year as per Sebi rules for private equity investment. This shows CVC's confidence that the valuation of the company will be much higher in the days to come," Sandeep Jajodia, vice-chairman & managing director, Monnet Ispat, told Business Standard. The acquisition of the stake will give CVC a representation on the company's board of directors.

The Monnet Ispat stock closed at Rs 109.25 today at The Bombay Stock Exchange, down Rs 3.75 from the previous closing price of Rs 113. However, it touched an intra-day high of Rs 118.65, which is its highest price in the last 52 weeks.

According to Jajodia, after CVC's acquisition of a 14.8 per cent stake in the company, the promoter's stake will come to 56-57 per cent. It is worth noting that a few weeks ago, the Monnet Ispat board had approved the merger of a closely-held firm called Monnet Power into itself.

At the moment, valuation of this company is being carried out and the merger is expected to be completed shortly. For the fourth quarter of the financial year, the two companies are expected to announce a merged result.

This is yet another investment by CVC in the Indian steel sector. In the past, it has acquired a stake in O P Jindal group company's Jisco and Jindal Stainless.

Monnet Ispat makes sponge iron and long steel products. The firm closed the year 2002-03 with a turnover of Rs 216 crore. Its plant is located at Raipur in Chhatisgarh.