SAL Steel Stake Sale: Sree Metaliks to Invest ₹99 Crore

Introduction to the Strategic Shift

SAL Steel Limited, a Gujarat-based iron and steel manufacturer, is set for a significant corporate restructuring. On September 4, 2025, the company's board of directors approved a strategic transaction involving a change in ownership and a substantial capital infusion. Sree Metaliks Limited will become the new promoter after acquiring a major stake from the current promoters and investing ₹99 crore into the company.

The Share Purchase Agreement

The foundation of this deal is a Share Purchase Agreement (SPA) between SAL Steel's current promoters and Sree Metaliks Limited. Under the terms of the agreement, the existing promoters, Shah Alloys Limited and SAL Care Private Limited, will divest a significant portion of their holdings. Sree Metaliks is set to acquire 3,02,56,989 equity shares from Shah Alloys Limited and another 1,27,02,506 equity shares along with 48,00,000 share warrants from SAL Care Private Limited. This transfer of shares will effectively hand over control of SAL Steel to Sree Metaliks, marking a new chapter for the company.

Capital Infusion via Preferential Issue

To strengthen its financial position and fund future growth, SAL Steel's board also approved a preferential issue to Sree Metaliks amounting to ₹99 crore. This capital raise is structured in two parts:

1. Equity Shares: Issuance of 1,92,50,000 equity shares at a price of ₹18.00 per share, aggregating to ₹34.65 crore.
2. Convertible Warrants: Issuance of 3,57,50,000 fully convertible warrants, also priced at ₹18.00 per warrant, totaling ₹64.35 crore. Each warrant can be converted into one equity share within 18 months from the allotment date.

The issue price of ₹18.00 per share is at a premium to the stock's closing price of ₹17.86 on the NSE before the announcement. This valuation was determined according to SEBI regulations and supported by a report from an independent registered valuer.

Strategic Use of Proceeds

The capital infusion is earmarked for specific growth-oriented initiatives. SAL Steel intends to use the ₹99 crore for several key purposes, including bolstering its working capital, financing the establishment of a new pellet plant, and undertaking the refurbishment and modernization of its existing furnace facilities. The funds will also be used to strengthen plant infrastructure and for general corporate purposes, positioning the company for enhanced operational efficiency and capacity.

Key Transaction Details

Change in Share Capital and Promoter Status

To accommodate the new issuance of shares, SAL Steel will increase its authorized share capital from ₹140 crore to ₹145 crore. Following the completion of the transaction, Sree Metaliks Limited is expected to hold a 37.99% stake in SAL Steel, officially becoming its new promoter. Consequently, the existing promoters will be reclassified as public shareholders. This change in control triggers a mandatory open offer under SEBI regulations, providing an opportunity for other shareholders to participate.

Management's Perspective

Babulal M. Singhal, Whole Time Director of SAL Steel, commented on the development, stating, "This strategic investment by Sree Metaliks marks a new chapter for SAL Steel. The capital infusion will strengthen our balance sheet and provide resources for expansion and modernization of our facilities. We believe this partnership will create significant value for all stakeholders." This statement underscores the management's positive outlook on the partnership and its potential to drive future growth.

About SAL Steel Limited

Founded in 2003 and headquartered in Gujarat, SAL Steel Limited is an established manufacturer of sponge iron and ferro alloys. The company also produces power, MS angles, and SS angles. A significant portion of its sponge iron output is utilized by its associate company, Shah Alloys Ltd., while the remainder is sold in markets across Rajasthan, Haryana, Punjab, and Himachal Pradesh. The company operates a 40-megawatt power plant that utilizes waste heat recovery, demonstrating a commitment to efficient operations.

Conclusion and Next Steps

The proposed acquisition and capital infusion represent a pivotal moment for SAL Steel. The deal promises to inject necessary funds for modernization and expansion while bringing in a new promoter with potentially fresh strategic insights. The entire transaction is contingent upon receiving the necessary approvals from shareholders at the upcoming Annual General Meeting on September 26, 2025, as well as from regulatory bodies. Market participants will be closely monitoring the completion of this deal and its subsequent impact on SAL Steel's operational performance and market standing.