Bowen Energy to become 58.8% subsidiary of co:Bhushan Steel

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Bhushan Steel's acquisition of Australian coal and mineral resource exploration company, Bowen Energy, had hit regulatory hurdle. Media reports suggest that the company has overcome the hurdle. Australian takeover panel had raised objections to Bhushan Steel's open offer for Bowen at 14 cents per share.

In an interview with CNBC-TV18, Neeraj Singal, MD, Bhushan Steel & Strips spoke about the issue and gave an outlook on the business going forward.

Below is a verbatim transcript of his interview. Also watch the accompanying video.

Q: There are a couple of reports that suggest that finally the hurdles that were there from the Australian takeover panel for Bowen Energy you have overcome them. Is it true and can you give us some timeline on when can you go ahead with this particular acquisition?

A: We had made an open offer about three months back for Bowen Energy and now we are holding about 58.8% in Bowen Energy. There were some complaints from some investors that our bid price was less, though it was on an open offer in the open market on the Australian Stock Exchange. But still the takeover panel took it and made some inquiries and put a valuation company to evaluate whether it was properly done.

The findings are that our offer was very valid and it was rather higher to the then market price and it is much more than the valuation of what they have come out with. So I think that hurdle is now over and we are fully in control of this company at 58.8%, and it is a subsidiary of Bhushan Steel.

Q: We understand that the Company Law Board has allowed you to convert the 35 lakh warrants into shares of Orissa Sponge. Is this a done deal or do you still need the Orissa High Court to give its nod and what is the game plan now? It increases your stake to 29%. Will that mean an open offer for Orissa, what is the game plan from hereon?

A: We had won the case in the Company Law Board. The opponent party has gone to the Orissa High Court and there is a hearing at the end of the month. I hope that there is nothing. In fact it is a complete mismanagement of the promoters of Orissa Sponge. It is a valid warrant that they were not converting. Even other things that they have done, they have siphoned off money out of the company and converted into shares and all those things.

All these matters are now in the Orissa High court. So I do not feel that there should be any problem in converting our 35 lakh warrants. With that we would be around 29% in Orissa Sponge.

Q: What about your open offer- you made an open offer in June 2009 it has not got the SEBI nod yet? What is the status over there?

A: I think it basically depends on SEBI when they would clear the open offer. But there are certain issues, litigations going on in the various courts, Delhi High Court and Orissa High Court where the promoters have done some mismanagement in acquiring the shares of Orissa Sponge, the promoter shareholding.

Basically the open offer has to go through because there is another open offer by Monnet, in which they are trying to acquire the promoter holding. Till the time the shareholding of promoters is in question, I do not think Sebi would be allowing the open offer to go through because the shareholding which was to be transferred from the promoters of Orissa Sponge to Monnet is in question whether that is a valid shareholding or they are having or needs to be scrutinised.

Q: Have you had a discussion with Monnet Ispat on buying their stake or selling your stake to them - have you two had any conversation on the topic?

A: We have had no communication with Monnet.

Q: On your capex plans - what's commissioning? I believe some blast furnaces are on the way to being commissioned - can you take us through what your capacity and your sales will be for second half and indeed for FY11?

A: We are in the commissioning of our blast furnace and slap making plant and would be commissioned by the end of the month or stabilising by end of December.

Our hot strip mill will also be some time in December or January.

So with that we complete the second phase of our expansion which will take our capacity to about 2.5 million tonne of steel making and 2.2 million tonne of hot rolled coils which would be a backward integration to our existing plants. So that will definitely add to the bottom line of the company because 60-70% would be captively consumed, and the balance 40% would be sold in the market.

Our second phase which is the expansion to 5 million which is also under implementation now is going on. Orders have been placed and civil work has started. So we are on track. By 2012 we would be a 5 million tonne steel.

Q: Since your capex stands are Rs 8,000 crore, debt stands at some Rs 9,000 crore plus and the market looks very good, will you be raising money?

A: We have certain plans to raise money but it will be at the appropriate time. Probably I think it may be some time later once our plant is commissioned, the blast furnaces and so on. So maybe in some time. Definitely we will be looking at it.

Q: Will it be through the equity route?

A: Yes it may be through the equity route.