The Sajjan Jindal-led JSW Steel on Friday said today one of its promoter groups has decided against the conversion of preferential warrants, thus forfeiting Rs523 crore paid when the warrants were allotted.
The warrants were issued to the promoter entity, Sapphire Technologies, in June 2010 on an initial payment of 25 per cent to JSW Steel. The last date for conversion of these 1.75 crore warrants worth Rs2,117.5 crore expired on Thursday.
Each warrant was convertible into one fully paid-up equity share of the company of Rs10 each at any time prior to 18 months from the date of allotment. The conversion price was fixed at Rs1,210 per warrant, but the stock is currently trading at less than half of this level.
JSW Steel had issued the warrants to the promoters to raise funds for capacity expansion. The conversion of warrants would have pushed up the promoters' holding in the company to 49.70 per cent from the current 44.99 per cent.
"The warrant holder has not exercised option to convert the 1.75 crore warrants allotted to it into equity shares of the company. The amount of Rs529.37 crore being the initial 25 per cent of the total consideration of Rs 2,117.5 crore received by the company has been forfeited," the steel maker said in a regulatory filing to the Bombay Stock Exchange.
A warrant is a security which entitles the holder to convert them into equity shares at a fixed price within the stipulated date. JSW Steel had issued these warrants on a preferential basis to Sapphire Technologies Ltd.
It is believed Sapphire Technologies refrained from exercising the conversion option as the shares of the steelmaker have nosedived since the warrants were issued.
The company has had to slash production at its key Vijayanagar plant by 70 per cent because of the restrictions on iron ore mining in Karnataka and particularly in Bellary district, from where the plant was getting most of its ore.