Miglanis pick up 24% stake in Lloyds Steel

Uttam Galva Metallics, the unlisted pig iron producing entity of Uttam Galva, has picked up 24% stake in Mumbai-based Lloyds Steel, giving the latter a much needed working capital requirement and an assured customer for the promoters of Uttam Galva.

DNA had reported in June last that Uttam Galva promoters are likely to infuse close to `500 crore and pick up 30% stake in Lloyds Steel, once Lloyds successfully walks out of its restructuring.

Uttam Galva has so far invested Rs189 crore in Lloyds Steel through two non-listed entities and while the company says as of now it is not looking for further investment, sources say Lloyds might require more.

“This is a financial investment for the family as Lloyds have been our strategic customer for a long time. They require working capital and we get forward integration through this investment,” said Ankit Miglani, managing director of Uttam Galva.

Uttam Galva Metallics currently owns a blast furnace in Wardha where Lloyds Steel runs a million tonne per annum steel plant and sources its pig iron requirement from Uttam Galva Metallics. The blast furnace produces close to half a million tonne of pig iron and 80% of it is supplied to Lloyds plant there.

Miglani said the family finds the valuation of Lloyds attractive and believes in its long-term potential. Besides, the company gets forward integration and at group level “it is a perfect hedge for us.”

The Lloyds Steel board on Wednesday decided to issue 8.15 crore equity shares on a preferential basis to two non-promoter companies — Ultimate Logistics Solutions and Siddharth Holdings.

The 24% equity will be issued at Rs11.65 per share, while the Lloyds Steel stock closed at Rs11.97 per share on the Bombay Stock Exchange on Friday.

These companies are held by Uttam Galva Metallics and by virtue of the preferential issue, the promoters will now hold 24% stake in the company and infuse Rs189 crore, said a source familiar with the development.

This will help Lloyds Steel raise money for working capital; it requires close to Rs600 crore to run its steel plant and current cash flows are inadequate.