The money is expected to be used for the capital requirements of its parent company, Asia MotorWorks (AMW), a maker of heavy commercial vehicles (HCVs).
"Essar Global intends to subscribe to the fully and compulsorily convertible debentures/preference shares of AMWHL of face value of up to Rs 590 crore. The FCDs would be compulsorily convertible into equity shares within a period of ten years," according to the proposal submitted to the Ministry of Finance for Foreign Investment Promotion Board (FIPB) clearance.
In its proposal, AMWHL has sought the approval for the issue of debentures/preference shares, foreign direct investment (FDI) up to 100 per cent, downstream investment in AMW and status of a foreign-owned Indian holding company.
An Essar spokesperson said that the company would not like to comment on strategic investments.
Essar Global's investments require FIPB approval as the company is incorporated in Cayman Islands. The FIPB meeting held on June 24 had deferred the proposal saying the revenue department requested for deferment to examine the source of Essar Global's funds.
Both the companies are expected to give clarifications to the revenue department before the next FIPB meeting, sources said.
The entire equity of AMWHL, consisting of 50,000 shares, are held by Anirudh Bhuwalka (99.88 pr cent) and six individuals (each with 0.02 per cent), said the proposal of AMWHL. AMW is ramping up capacity of its plant at Bhuj in Gujarat with an investment of around Rs 1,500 crore, said industry sources.
The company is mulling a foray into the growing light commercial vehicles (LCVs) segment with its first offering called Pug.
"Though our focus will be on HCVs, to complete our product portfolio we are also looking at entering the LCV market in India. Our LCV foray will require fresh investments and we are formalising a strategy to enter the segment," Anirudh told mediapersons early this year.
The company also plans to get into bus manufacturing and wheel rim production at its Bhuj plant.
It also plans to invest heavily in research and development.
