The Tata Sponge rights issue opened for subscription on Tuesday and will end on July 16. It has been priced at Rs 500 a share
Tata Steel will subscribe up to 90 per cent of the Rs 1,650 crore rights issue of Tata Sponge.
In an intimation to the stock exchanges, Tata Sponge has informed that its promoter (Tata Steel) has undertaken that it will participate in the rights issue to the extent of 90 per cent of the rights issue, up to Rs 1,485 crore.
The Tata Sponge rights issue opened for subscription on Tuesday and will end on July 16. The issue has been priced at Rs 500 a share.
On June 13, the Tata Sponge board decided on the issue of 3.3 crore shares to eligible equity shareholders who will get to subscribe to 15 shares for seven held.
In October, the board had approved a rights issue not exceeding Rs 1,800 crore.
The issue would be used to retire borrowings on account of the acquisition of Usha Martin’s steel business.
Last September, Tata Steel had entered into a definitive agreement for the acquisition of the steel business. It was later announced that the vehicle for the acquisition would be Tata Sponge, a 54.5 per cent subsidiary of Tata Steel.
In April, Tata Sponge completed the acquisition of Usha Martin’s steel business including captive power plants for Rs 4,094 crore subject to hold backs of Rs 640 crore, pending transfer of assets like mines and certain land parcels.
However, in May, Tata Sponge informed that it had completed the registration of the transfer deed among Usha Martin, the company and the government of Jharkhand for transfer the operative iron ore mine.
Tata Sponge, engaged in sponge iron business, had been evaluating options to value-add its product portfolio and enter into steel manufacturing. Going forward, Tata Sponge will be Tata Steel’s vehicle for long products.
The move is in sync with Tata Steel’s endeavour to create a larger long products portfolio to participate in the growing market for long products, driven by an increase in urbanisation and infrastructure development. To achieve this, integration of the steel business of Usha Martin and a roadmap for growth in long products have been identified as one of the focus areas for the future.