CVC International, a Citigroup Global Investments unit, is purchasing $10 million outstanding foreign currency convertible bonds of Jindal Strips from existing bondholders.

CVC wants to convert these bonds into equity shares of Jindal Stainless Ltd, post demerger.

Arvind Parakh, director-finance, Jindal Strips, said: "We have received a non binding in-principle letter from CVC."

Jindal Strips has obtained all necessary approvals for the de-merger and hopes to complete all formalities within the next ten days. Post de-merger, Jindal Strips will be called Jindal Stainless Ltd and become a focused player in the stainless steel business.

"These are bonds which are listed on the Luxumberg Stock Exchange and CVC is purchasing it from the secondary market. On conversion into equity shares of the company, $10 million worth of bonds would translate into 2.6 million shares. This is 12 per cent of the company's Rs 18.9 crore (Rs 189 million) equity capital," Parakh said.

"Once these are converted into equity shares, we are requesting CVC to have a minimum lock-in period of over a year," he added.

The intended purchase by CVC is conditional upon various matters including approvals by the holders of FCCBs and the investment committee of CVC; completion of a due diligence process; receipt of regulatory approvals (if required) and negotiation and execution of final detailed agreements with Jindal Stainless and the promoters.

The company has outstanding FCCBs of $15 million. With the conversion of these bonds, there will be no debt outflow in the future to the extent of FCCBs converted, Parakh said.

Jindal Strips stock closed on Monday higher by 7 per cent at Rs 244.20 on the Bombay Stock Exchange.

It hit a 52-week high on Monday at Rs 245. Total volume of 49,790 shares changed hands on the BSE.

It is not known at what price the bonds will be purchased by CVC. It should be close to the market price level, sources said.

CVC International intends to negotiate and finalise the agreements over the next few weeks. 

The in-principle letter of CVC is not binding and does not constitute an agreement or decision to purchase the FCCBs.