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Bhushan Steel acquires 9.5% stake in Orissa Sponge Iron & Steel

Delhi-based Bhushan Steel has acquired 9.5% stake of cash strapped real estate firm Unitech promoter, Chandra family, in Bhubaneswar-headquartered Orissa Sponge Iron & Steel for about Rs 23 crore, confirmed a top executive of Bhushan Steel. Bhushan Steel already owns 6% in Orissa Sponge.

Prior to the acquisition, Chandras share in Orissa Sponge stood at 12.11%. The acquisition, which has increased Bhushan Steel's stake in Orissa Sponge to 15.5%, fetched the Chandras Rs 118 per share. Orissa Sponge's scrip moved up 5% to Rs 111.95 on the BSE on Thursday.

The speculation around Chandra's stake sale in Orissa Sponge has been in the market for the past two months, as financial situation at Unitech worsened. Since sales in the real estate sector have plummeted and private equity is not flowing into the sector, companies are finding it difficult to raise funds to execute their expansion plans, said a person in knowledge of the development.

Unitech had a total debt of Rs 8,300 crore on its balance sheet as of September 2008, of which Rs 2,500 was supposed to be repaid by March 2009. The company claims to have reduced its debt obligation from Rs 2,500 crore to Rs 600 crore.

Incorporated in 1979, Orissa Sponge has iron ores reserves of around 120 million tonne and coal reserves of a similar amount. The company has sponge iron and steel billet plants in Palaspanga (Orissa) with an installed capacity of 2.5 lakh tonnes.

Orissa Sponge's main promoters led by Prashant Kumar Mohanty and his investment unit Torsteel Research Foundation India together own 41.51% stake. In addition, George Soros' Quantum Fund and Infrastructure Development Finance Corporation hold 6.31% and 5% stake in the company respectively.

Source: Economic Times

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