Mumbai: Essar Steel on Wednesday announced that it has completed the acquisition of Hy-Grade Pellets (HGPL) and Steel Corporation of Gujarat (SCGL) from Stemcor, UK. Consequently, both companies are now fully owned subsidiaries of Essar Steel .

The acquisition of HGPL and SCGL were completed at a cost of $450m (approximately Rs1950 crore) and funded through equity by way of issuance of compulsorily convertible preference shares (CCPS).

The issue of these instruments has already been approved by shareholders and regulatory authorities, the company release said.

Essar Steel on Wednesday informed the BSE that the company has completed the issue, allotment and dispatch of certificates in respect of 8% CCPS of Rs 350 each aggregating to $450m to the promoters and non-promoters in the ratio of 75:25 . Essar Steel Holdings, Mauritius (Promoters) has been allotted 41,948,523 CCPS while Asia Steel Holdings, Mauritius (Non-Promoters) has been allotted 13,982,841 CCPS.

Each CCPS, unless earlier redeemed by the company, is convertible into 10 equity shares of Rs 10 each fully paid up at a premium of Rs 25 per share at the expiry of 18 months from the date of allotment.

With these acquisitions, Essar Steel becomes a fully integrated steel producer with end-to-end control, over raw materials, processes, technology and finished products.

The Essar steel scrip on Wednesday was up 1.4% to Rs 42.40 The acquisition of HGPL will bring in the benefits of high quality raw material and considerably better yields in steel making.

HGPL operates a 4m tonnes per annum pellet plant at Visakhapatnam which is being further expanded to 7m tonnes. SCGL's acquisition is expected to result in considerable value addition across the entire chain and will give Essar a more diversified product range.

Essar until now has only been a hot rolled coil producer. SCGL will bring cold rolled steel, and galvanised steel to Essar's product basket. These products fetch over $ 200 more than hot rolled coils.

The acquisition will bring in 1.2m tonnes of cold rolling capacity into Essar Steel, making it one of India's largest producers of cold rolled products.

The company has stated that these new products will provide a much wider market penetration capability and offers a hedge against cyclicality in domestic and international markets.

Commenting on the completion of the transaction, Essar Steel MD Prashant Ruia, said "We expect that these acquisitions will bring in increased synergy and seamless integration in our operations and help strengthen the company.

We look forward to consolidating our position in the market, especially in the value added segment."