Leading financial institutions are planning to hike their total equity in the OP Jindal-promoted Jindal Vijaynagar Steel (JVSL) to 33.6 per cent from the present level of 8 per cent.
The institutions will hike their equity in the Rs 5,215 crore JVSL by subscribing to the latter's Rs 632-crore preference share issue. The shares are being issued to the institutions in lieu of the interest dues of Rs 632 crore on the implementation of the 1.7 million tonnes hot rolled (HR) coil project near Bellary in Karnataka.
After the issue, the promoters' equity would drop to 41.38 per cent from 57.65 per cent, according to industry sources. Karnataka State Industrial Development Corporation has a minority stake in JVSL.
When contacted, a senior company official said, "Once we receive the final sanction letter from the institutions, we will put up the proposal to the JVSL board and to our shareholders for approval."
The subscription pattern will be in the same ratio as the interest dues outstanding to the institutions. ICICI will pick up shares worth Rs 200.4 crore, Industrial Development Bank of India Rs 151.5 crore, Life Insurance Corporation Rs 57.8 crore, IFCI Rs 65.4 crore, General Insurance Corporation Rs 28.1 crore, State Bank of India Rs 16.2 crore, Unit Trust of India Rs 98.7 crore and IIBI Rs 9 crore.
The FIs intimated the company about their decision to fund the interest component through equity after the last meeting of the heads of institutions on November 5, said sources.
By subscribing to the issue, the FIs will increase their equity component in the project to Rs 760 crore from Rs 128 crore.
After the issue and promoters' contribution, the total equity component of JVSL will rise to
Rs 2,238 crore from the present Rs 1,501 crore.
The interest dues have mounted is due to the delay in implementation of the project. While the corex 1 of JVSL was delayed by 10 months, the corex 11 and pelletisation unit are expected to be postponed by 15 months. The project cost has shot up by Rs 929.2 crore to Rs 6,144.2 crore from the estimated Rs 5,215 crore.
The promoters have told the institutions they would seek no more additional funding except drawing down the sanctioned Rs 350 crore for completing the corex 11 unit and pelletisation unit.
