Jindal Stainless might complete de-merger by March end

Interest on loans of Rs 7,800 cr has hit 14%; not feasible to repay debt without demerger, says firm

Ratan Jindal- controlled Jindal Stainless Group, which has manufacturing units at Hisar (Haryana) and Odisha's Kalinganagar, is giving final touches to its de-merger. The de-merger which has involved the carving out of two separate entities -- Jindal United Steel Ltd (JUSL) and Jindal Coke Ltd (JCL) -- is expected to be completed by March end.

As of now, two flagship companies -- Jindal Stainless Hissar Ltd and Jindal Stainless Ltd -- are listed entities. The move behind the de-merger is to apportion debt between the segregated entities.

"Erosion of net worth, accumulating losses and rising interest rates have prompted us to take the de-merger route. The interest rate on loans outstanding has gone up to 14 per cent and it was not feasible to repay the piling debt without splitting the entities. We have got the necessary approvals for the restructuring plan and formalities are expected to be completed by March-end", said a senior company source in the know of the matter.

Between them, Jindal Stainless Hisar Ltd (JSHL), Jindal Stainless Ltd (JSL), JCL and JUSL have a debt totaling Rs 7,800 crore. After the de-merger, the debt would be distributed as: JSHL, Rs 2,600 crore, JSL, Rs 2,300 crore, JCL, Rs 500 crore and JUSL, Rs 2,400 crore. Jindal Stainless Group had gone for corporate debt restructuring (CDR) in 2009 at the time of global economic meltdown.

In the two newly incorporated entities- JUSL and JCL (both subsidiaries of JSL), JSL which oversees the Kalinganagar operations, will hold 26 per cent equity each. Balance shares would be held by the promoters' family.

As a fall-out of de-merger, JSL would handle Steel Melting Shop (SMS), ferro alloys, captive power plant (CPP) and railway siding. JUSL would take care of the Hot Strip Mill (HSM) operations and the onus would be on JCL to oversee coke oven operations. As of now, there are no plans to list either JUCL or JCL.

Separately, JSL has committed an investment of Rs 575 crore to de-bottleneck its Kalingangar unit and expand capacity to 1.1 million tonne per annum (mtpa) from 0.7 mtpa. The expansion would be met through the company's internal accruals. By 2020, JSL is eyeing capacity of 1.8 mtpa by investing Rs 1,600 crore. The facility at Kalinganagar produces all grades of stainless steel and exports to Europe and South East Asian countries. In the December quarter, JSL posted a profit of Rs 40 crore as against a loss of Rs 134 crore in the corresponding quarter of previous fiscal. Capacity utilisation of the Kalinganagar plant was 92 per cent in Q3 and sales volume was higher by 25 per cent.