Promoters To Up Stake In Jvsl By 4 Per Cent

The O P Jindal group, promoters of Jindal Vijaynagar Steel (JVSL) _ the 1.5 million tonne hot rolled coil steel unit at Bellary _ has decided to hike its stake by four per cent to 55 per cent by subscribing to 40 crore preference shares worth Rs 404 crore.

According to a senior company official, for subscribing to the preference issue, the promoters have arranged funds to the tune of Rs 276 crore from JVSL's sister company, Jindal Iron and Steel Company (Jisco), friends and relatives (Rs 47 crore).

Jisco had lend the assistance as an advance against equity, the official added.

 

The company has also received a June 30, 2000 deadline from financial institutions (FIs) to bring in additional equity of Rs 105 crore.

JVSL has called an extraordinary general meeting (EGM) in the last week of March to seek approval from shareholders for issuing nearly 40 crore ordinary shares at par to the promoters.

With the clearance of the resolution, the company's enhanced paid-up equity will go up to Rs 1606 crore from the present Rs 1501 crore. The promoters will hold Rs 876 crore worth of equity in the company.

After subscribing to the issue, the stakes of the Karnataka State Industrial Development Corporation (KSIDC) and financial institutions will come down marginally to 3 per cent and 7 per cent from the previous 3.3 per cent and 8 per cent, respectively. The stake of the public will also come down marginally to 38 per cent from the previous 39 per cent.

Sources said the promoters promised the financial institutions to infuse additional funds in case of a cost overrun. It is learnt that the cost of the project, after suffering a 15 per cent cost overrun due to technical problems, stood at Rs 6,140 crore. The plant is the first in the country to use corex technology.

It may be recalled the JVSL is the only steel company which had received additional financial assistance for completing its project. The other companies have not yet fulfilled the FI conditions.

The steel company had earlier sought financial assistance of nearly Rs 500 crore from various institutions including IDBI.