Jindal Stainless defers ECB

Jindal Stainless Ltd on Thursday said it had deferred plans for an external commercial borrowing (ECB) issue owing to adverse market conditions and would raise Rs 1 billion from the domestic market.

The overseas issue of around $50-75 million was intended to finance the company's upcoming stainless steel project in Orissa.

"We have decided to defer the ECB as of now," Arvind Parakh, director (finance), said, attributing the decision to a host of factors, including increased cost of foreign borrowings, volatility in the foreign exchange market, and adequate liquidity in the domestic market.

Parakh said the company now plans to increase its domestic borrowings for 2004-05 (April-March) by Rs 1 billion since it is now not tapping the overseas market.

In July, Jindal Stainless had concluded a 2-billion-rupee non-convertible debenture issue in the domestic market.

The 10-year paper carries an annual interest rate of 6.9 per cent.

According to Parakh, the company had received an overwhelming response to the NCD issue and thus would not face any problem in raising an additional 1 billion rupees from the domestic market.

Parakh said that it also made sense now to raise money in India since borrowing was cheaper vis-a-vis the overseas market.

Borrowing in India costs the company around 7 per cent, while an overseas borrowing could cost between 10 per cent and 11 per cent owing to the changed international scenario, he said.

The Orissa project will be executed in two phases. The first phase would entail an investment of Rs 9.5 billion and involves setting up a 150,000 tonne ferro-chrome plant at Duburi in Jajpur district in the eastern state.

Of the Rs 9.5 billion, debt would account for Rs 6.5 billion, while the remaining Rs 3 billion would come from internal accruals.

Jindal Stainless runs two plants, including the country's only integrated stainless steel unit with a capacity of 500,000 tonne at Hissar in Haryana. It also has a ferro alloys unit at Vishakapatnam.

The O P Jindal-promoted company also entered into an agreement last month to acquire a stainless steel cold-rolling unit in Indonesia at a cost of $30-35 million.