Jindal group's major restructure

MUMBAI NOV. 13. The Jindal group has announced a major restructuring of its steel business today with regard to group companies Jindal Vijaynagar Steel (JVSL) and Jindal Iron and Steel Company (JISCO).

The scheme of arrangement broadly deals with demerger of investments of JISCO, reorganisation of JVSL capital and then merging of the steel business of JISCO with JVSL.

The demerger pertains to the demerger of the investments division (including equity holding in JVSL of JISCO) into Jindal Southwest Holdings Ltd. (JSWHL). In consideration, the equity shares will be issued to shareholders of JISCO in the ratio of one equity share of JSWHL for every four equity shares held by them in JISCO. The shares of JSWHL will be listed on the Bombay Stock Exchange, the National Stock Exchange and the Delhi Stock Exchange. The appointed date for the demerger is April 1, 2003.

The re-organisation of capital of JVSL provides for compliance of terms and conditions of financial restructuring package approved by corporate debt restructuring package (CDR). As contemplated in the CDR approved by the lenders of JVSL, the scheme provides for conversion of four equity shares out of every 10 equity shares held by equity shareholders of JVSL into four 0.01 per cent cumulative redeemable preference shares (CRPS) of Rs 10 each.

The 0.01 per cent CRPS shall be converted into equity shares of Rs. 10 each in the ratio of one equity share for every four CRPS held by the shareholders. As contemplated in the CDR, Rs. 457 crores of debt shall be converted into 45.7 crore equity shares of Rs. 10 each of JVSL. These will not be liable to conversion.

JVSL shall allot one warrant in respect of every seven equity shares held by its original shareholders. The holder of the warrant will have a right to apply and be allotted one equity share of JVSL for each warrant held by the shareholder. The warrant holder will be entitled to apply for the equity share on or before April 1, 2006 and will be required to pay Rs 10 per equity share.

After the re-organisation of capital of JVSL, the paid up value of the entire reorganised capital will be reduced by Rs. 9.375 per share. Thereafter, the equity shares would be consolidated into fully paid up shares of Rs. 10 each resulting in the reduction in the number of equity shares. The warrant entitlement will also be adjusted appropriately to give effect to the reduction. JISCO's equity capital will be at Rs. 44.11 crores and JVSL's reduced capital will be at Rs. 96.56 crores; giving a combined equity capital of Rs. 140.67 crores from the earlier Rs. 1,291 crores. The outstanding debt of the merged entity as on March 2004 would be Rs. 4,750 crores. The debt equity ratio currently stands at 5:1 and this will be brought down to less than 2.

As regards the merger of the steel business of JISCO with JVSL, the share exchange ratio for the amalgamation is 16 equity shares of Rs. 10 each of JVSL for one equity share of Rs. 10 each held by JISCO shareholders.