The battle to acquire Orissa Sponge is set to intensify as Delhi-based Monnet Ispat and Power has joined the race and acquired a 27 per cent stake in the company. The warring brothers of the Bhushan group -- Sanjay Singhal, the promoter of Bhushan Power, and Neeraj Singhal, the promoter of Bhushan Steel [Get Quote] -- are already fighting for control over the company.

Backed by P K Mohanty, executive vice-chairman and managing director, Orissa Sponge, and the promoter of the company, Monnet Ispat has now become the frontrunner for acquiring the company by buying a total of 54 million shares. Sources said Monnet Ispat has also acquired 7 million warrants from Mohanty. Monnet was finalising a blueprint in consultation with Mohanty to come out with an open offer before February 28, sources said.

Mohanty has around 41 per cent stake in the company.

While refusing to comment on the issue, a senior Monnet Ispat official said on condition of anonymity, "The acquisition of stake is strategic in nature. We are engaged in the steel sector and open for strategic investment."

A Bhushan Steel official refused to comment on the issue.

Incorporated in 1979, Orissa Sponge has iron ore reserves of around 120 million tonnes and coal reserves at the similar level. The company has sponge iron and steel billet plants in Palaspanga (Orissa) with an installed capacity of 250,000 tonnes.

Monnet's offer price is expected to be Rs 320 per share as against the current offer of Rs 300 by Bhushan Power, who joined the race after Neeraj Singhal-led Bhushan Steel bought around 9 per cent stake from Unitech to take its total stake to 14.8 per cent. In addition, Bhushan Steel also acquired 3.5 million warrants. The last date of conversion is June 2009. Post-conversion, Bhushan Steel's stake will go above 21 per cent, thereby automatically triggering the takeover code. This will force the company to give an open offer for 20 per cent stake more.

However, after the open offer for 26 per cent given by Bhushan Power on February 9, Bhushan Steel is left with little option but to come out with a competitive bid by February 28, which is the last date of submitting the competitive bid. Currently, Bhushan Power does not have any equity stake in Orissa Sponge.

Sources said that Mohanty was asking a substantial premium to the underlying price and even higher than the price offered by Sanjay Singhal.

The company's share price is currently ruling at Rs 269 as against Rs 72 on January 15.

It was going to be a three-way contest, sources close to the development said. While the two Singhals were already in the race, Monnet's entry would turn the battle in favour of Mohanty, who wanted to maximise the exit price, sources said.

Bhushan Steel Managing Director Neeraj Singhal said, "This is now a corporate warfare. We will take a call on making an open offer shortly," he said.

Sanjay Singhal, the promoter of Bhushan Power and Steel, who has already made an open for Orissa Sponge, was caught unawares.

He said, "I spoke to the Orissa Sponge promoters 3-4 days back and they said that they had not finalised anything and would consider us as a strategic partner. Our meeting was very positive."