SAL Steel IPO seen oversubscribed 10 times

SAL Steel Ltd (SSL), a subsidiary of Shah Alloys Ltd (SAL), expects its initial public offering (IPO) to be over subscribed by over 10 times following an overwhelming response by retail investors on the final day of the issue on Friday. The issue was fully subscribed on its very third day on Wednesday.

"We are expecting the issue to be over subscribed by over 10 times owing to the tremendous response of retail investors. The issue was fully subscribed on its very third day. The retail segment is expected to be over subscribed by over 25 times."

Rajendra Shah, chairman and managing director, said on Friday. The issue is being made through a book building process. Price band for the issue has been fixed at Rs 12 to Rs 14.

Of the 4,20,00,000 equity shares on offer, the company has reserved 10 per cent shares for allotment to shareholders of Shah Alloys.

Of the balance net offer to the public of 3,78,00,000 equity shares, 50 per cent shall be allocated on a discretionary basis to qualified institutional buyers, 25 per cent will be to non-institutional investors and the balance 25 per cent will be available for retail investors.

The retail portion will be allotted on a proportionate basis. The public offer constitutes 44.48 per cent of the post issue paid-up equity capital of the company.

"Apart from retail investors, institutional buyers such as Kotak Mahindra, Reliance Industries and HSBC among various others applied for the issue," Shah said. The proceeds from the IPO will be utilised to float its Rs 200 crore plus new subsidiary, SAL Steel.

The new unit will manufacture sponge iron, ferro alloys to feed the expanding units with adequate raw materials and a rolling mill with 40 MW captive power plant as a backward integration plant of the group.

The company's new manufacturing unit in Kutch is expected to commence its commercial production by the end of this calendar year.

The Rs 200-crore plus project is being funded through the promoters' contributions of about Rs 51 crore, rupee term loans of more than Rs 114 crore and the balance from the proceeds of the issue.

The company's ferro alloy project with a total capacity of 61,890 tonnes per annum capacity would be manufacturing ferro chrome, low carbon silicon manganese, ferro silicon and ferro manganese.

The sponge iron capacity would be 180,000 tonne per annum. The rolling mill will have a 25,000 tonne per annum capacity. Apart from the backward integration project through SAL Steel, the group is also implementing a project to increase its captive power and gas capacities.

A project for forward integration into cold rolled product is also under implementation in SAL.