Ispat Industries shares jump on JSW Steel's open offer

Shareholders reposed faith in the company after JSW announced attractive open offer price

BY Siddharth Kumar
Delhi

Shares of Ispat Industries Ltd bounced back smartly on Wednesday and closed 11 per cent higher, after the Sajjan Jindal-led JSW Steel Ltd made an open offer to buy a further 20 per cent stake in the firm. The open offer was made at price, higher than the per share deal price announced on Tuesday.

JSW Steel, which announced the acquisition of a 41.3 per cent stake in Ispat Industries, on Tuesday for Rs 2,157 crore, has made an open offer at Rs 20.54 a share. The offer price is 3.5 per cent higher than the Rs 19.85 that JSW will pay to acquire 1,086.6 million equity shares in the debt-ridden company. The offer to Ispat shareholders begins February 12 and will close on March 3.

On the Bombay Stock Exchange, the Pramod Mittal and Vinod Mittal-promoted Ispat Industries ended the day at Rs 23.60. On Tuesday, the scrip had tanked 15 per cent to close at Rs 21.

The rise on the Ispat counter was significant, since investor sentiment in the broader market was weak and the BSE benchmark Sensex settled 44.5 points lower at 20,015.8. Even the JSW Steel counter witnessed profit-booking and ended 0.75 per cent lower at Rs 1,202.90.

Equity analysts said investors rushed towards the Ispat counter as they realised this deal is in favour of the company. "The deal undoubtedly stands attractive over the long term," said Kamlesh Bagmar, an analyst at brokerage house Prabhudas Lilladher.

The deal makes JSW Steel, India's largest steel company. Several big players of the industry, including steel czar LN Mittal's ArcelorMittal, Tata Steel Ltd, were in the race to acquire a stake in Ispat Industries.

The deal will help in timely execution of Ispat's capex plan of Rs 3,140 crore as funding issues are mitigated, given JSW Steel's strong credentials, said Angel Broking in a note to investors.

"We believe the acquisition is positive for JSW Steel in the long term, as it will become India's largest steel company with total capacity of 14.3 million tonnes (Greenfield projects have been difficult to implement because of land acquisition/environmental clearance issues)," it added.

According to Standard Chartered analysts, Satish Kumar and Saurabh Prasad, to fund the acquisition, JSW Steel will need to take on a debt burden of Rs 2000 crore or sell investments worth Rs 1700 crore.

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