Promoters of Visa Steel, part of the R5,000-crore Visa Group, are looking to shed part of their stake in the company to raise funds and pare down debt,?two persons familiar with the development said.
Promoters own 74% stake in Visa Steel. ?We have a large promoter stake in the company. So, there?s always an option to sell some stake,? said a senior official with the company. ?We are monitoring the market conditions and when the time is right, a stake sale can happen.? He, however, did not specify the quantum of stake that will be offloaded.
?We had approached merchant bankers last year to sell some stake, but it did not work out,? said the company?s spokesperson, when contacted. ?However, we were unable to get the buyers and, finally, we had to go for corporate debt restructuring.?
The company?s R3,000-crore debt was referred for corporate debt restructuring last week. The steelmaker, which has a 0.5 million tonne per annum integrated steel plant in Orissa, made a net loss of R118 crore in fiscal 2012 compared to a profit of R51 crore in the previous fiscal. It has a market valuation of R550 crore as per its last closing price of R50.
Vishambhar Saran, who worked with Tata Steel for 25 years, set up the Visa Group in 1994.
In 2010, Visa Steel announced plans to expand the Orissa plant?s capacity to 2.5 million tonne and, subsequently, to 4.86 million tonne by 2014. Apart from the Orissa plant, the steelmaker is also waiting for government approvals to start a 2.5 million tonne per annum steel plant in Chhattisgarh and a 1.25 million tonne per annum steel plant in Madhya Pradesh.
The company also has a joint venture with Chinese steelmaker Bao Steel called Visa Bao. The JV produces 100,000 tonne of ferro-chrome alloy per year from its plant Kalinganagar in Orissa.
Visa Steel raw material supply chain has hit a roadblock. Supply from the company?s Gandhamaran and Daitari iron ore mines in Orissa were suspended in September 2011 after the Orissa Mining Corporation said that the mines were in a forest area and needed Forest Clearance. The company is also yet to receive approvals for its Horomoto mines in Orissa.
The constraints raised the company?s raw material costs for the 2012 fiscal by 30% to R1,038 crore from R800 crore last fiscal. Raw material costs account for nearly 75% of the company?s total revenues for the fiscal. Steelmakers like Tata Steel and SAIL spend around 25-30% of their annual revenues on raw materials. JSW Steel, which also faced raw material supply constraints in the 2012 fiscal, spent 65% of its annual revenues on raw materials.
