Unitech promoters may buy up to 40% stake in Orissa Sponge

NEW DELHI: The promoter family of Unitech is close to acquiring up to 40% of Orissa Sponge Iron and Steel (OSISL). Prakausli Investment — a closely-held investment company owned by the Chandra family — has acquired 15% stake in the company, through a preferential allotment, triggering a 20% open offer to buy the shares of other shareholders. In addition, the investment company would also convert another 27,50,000 warrants into shares, accounting for an additional 4.13% stake in Orissa Sponge.

Sources say Prakausli Investment is shelling out about Rs 82 crore for the 19.42% stake and it will have to pay extra for the open offer. If the open offer is fully subscribed, the investment company of the Unitech promoters will own around 40% in OSISL. Before the expansion of the company’s equity base, the majority 51% stake in Orissa Sponge was held by Torsteel Research Foundation in India, and its managing director BK Mahanti, a local entrepreneur.

In addition, George Soros’ Quantum Fund, and IDFC, who are both shareholders in Unitech, have each bought a 2.5% equity stake in the company.

Sources close to the deal say the Unitech promoter family is making a strategic investment in the loss-making OSISL as a backward integration exercise for the promoters of the country’s second-largest real estate company.

Steel and cement are the main raw materials for the construction sector. Besides being into the manufacturing and exports of iron and steel, the company is also into iron-ore mining and commands a huge landbank in the states of West Bengal and Orissa.

The OSISL stock price has risen significantly in recent times. It has risen by Rs 434 in the past one month and closed at Rs 678 in the BSE on Monday. In December 2006, the scrip had touched a 52-week low of Rs 23.

Sources say the Chandra family had a role to play in the Rs 22.5-crore investment by George Soros’ Quantum Fund for a 2.5% stake in Orissa Sponge. The Chandra family is said to have close relations with Mr Soros and Unitech was of the first Indian companies in which Quantum Fund had invested. The fund had put in $250 million in Unitech for a 2.1% stake in 2005.