State-owned Rashtriya Ispat Nigam?s (RINL?s) plan to convert its R7,000-crore equity into reserves before the public offer, has not found favour with the steel ministry. Instead, the ministry has suggested that RINL should redeem its preference capital worth over R2,000 crore to the government and then a part of the remaining equity can be converted into reserves.
?The option of converting the entire equity into reserves is not feasible. We have told them to redeem their preferential capital first and then we can look at converting partial equity into reserves. We have had many meetings with RINL in this regard but nothing has been finalised yet,? a senior ministry official, who did not want to be quoted said.
RINL was a loss-making entity for over a decade since its inception. In early 1990s the government had converted around R2,000 crore of debt into preference capital. The official said that the redemption of preference capital made sense as the formal date to redeem them was also nearing.
The government-owned steel manufacturer has an equity base of as high as R8,000 crore. The company last year was declared as a ?Navratna? on the condition that it would divest up to 25% stake and get listed in the stock market. The initial public offer has to happen within two years of obtaining ?Navratna? status.
For this, it has to go through huge equity restructuring in order to maintain better EPS (earning per share). RINL chairman and managing director PK Bishnoi recently expressed the company?s intention to bring the equity base to R1,000 crore by converting remaining R7,000 crore into reserves.
The firm is also negotiating to acquire Orissa-based Neelanchal Ispat Nigam ? a company promoted by MMTC. The ministry official said that the acquisition ?was most likely to happen before the public offer?. ?The talks with MMTC over Neelanchal?s buy-out are in an advance stage. There are some differences over the valuation of the company. We hope to settle that shortly,? the official said.
