Tata Steel has decided to underwrite up to 90 per cent of the Rs-1,650-crore rights issue of subsidiary Tata Sponge, which opened for subscription on Tuesday.

The company informed the bourses that it would pick up the unsubscribed shares, if any, of the issue where 15 shares are offered for every seven share held.

The stock of Tata Sponge, which is shifting its registered office from Odisha to Calcutta, closed at Rs 540 on Tuesday, while the rights shares have been priced at Rs 500 a piece, including a premium of Rs 490 a share.

When the issue was announced on June 13, the stock had closed at Rs 618.47. Since then, the scrip is down 12 per cent. It closed on Monday down 1.6 per cent or Rs 8.80.

The rights issue was proposed to finance the acquisition of the steel business of Usha Martin for Rs 4,525 crore.

Tata Steel, which holds a 54.5 per cent stake in the company, had committed itself to pump in close to Rs 900 crore by way of its entitlement of shares. It has now informed the shareholders that Tata Steel would subscribe up to Rs 1,485 crore worth of shares in the company.

If minority shareholders do not subscribe to the issue as much as they are entitled to, Tata Steel’s stake in Tata Sponge, whose name is being changed to Tata Steel Long Products Ltd, will go up.

The rights issue and change of name and registered office is expected to give a new profile to the company. “We endeavour to position ourselves as an integrated steel enterprise with a diversified business portfolio,” T.V. Narendran, chairman of the company, said in a communication to shareholders in the annual report.

Apart from the 1-million-tonne steel making facility at Jamshedpur, which Tata Sponge bought from UML, it also acquired an operating iron ore mine.

On May 27, it took over the mine by completing the transfer deed among Tata Sponge, UML and the Jharkhand government.

The acquisition had also involved a coal mine under development and a captive power plant.

Tata Sponge, which reported revenues of Rs 1,049.70 crore in the year ended March 31, 2018, was established in 1982 as a joint venture between Tata Steel and Industrial Promotion & Investment Corporation of Orissa Ltd (Ipicol).

In 1991, Tata Steel acquired Ipicol’s entire stake and Tata Sponge became an associate company of Tata Steel.