Tata Sponge to seek EGM nod for preference issue to Tata Steel

Tata Sponge Iron(TSIL) has called an extraordinary general meeting (EGM) on December 14 to seek approval for issue of preference shares on private placement basis to its promoter, Tata Steel, for up to Rs 1,000 crore. Tata Steel recently announced TSIL as its vehicle for the acquisition of Usha Martin’s steel business in a deal size of Rs 4,300-4,700 crore. The transaction, which will mark TSIL’s entry into the steel sector, was approved by the Competition Commission of India on Tuesday. TSIL had, in an earlier notification to the exchanges, said it would raise capital through a combination of a rights issue of Rs 1,800 crore, external borrowings up to Rs 2,500 crore, apart from the NCRPS to fund the acquisition. In its EGM notice, TSIL has said it proposes to issue, offer and allot non-convertible redeemable preference shares (NCRPS) at a coupon of 11.30 percent on a private placement basis to Tata Steel. TSIL would also seek an increase in borrowing limits at the EGM, besides creation of charges, an increase in authorized share capital and a consequent amendment of a capital clause in the memorandum and Articles of Association of the company. In a meeting held on October 24, the company’s board of directors had approved the issuance of NCRPS. Following this, in a meeting on November 15, the committee of the board approved the proposal to issue, offer and allot up to 10,00,00,000 - 11.30 per cent NCRPS of face value of Rs 100- each at par, aggregating up to Rs 1,000 crore on a private placement basis to Tata Steel, subject to shareholder approval. The tenure of the shares would be not more be than 13 years from the date of allotment. It also approved an increase in TSIL’s authorized equity share capital from Rs 25 crore to Rs 75 crore. TSIL directors also gave their nod for an increase in borrowing limits from Rs 400 crore to Rs 5,000 crore or the aggregate of the paid-up capital, free reserves and securities premium of the company, whichever is higher.