SAIL to be debt free soon

Reduces borrowings to level of it's deposits across banks

Public sector giant Steel Authority of India Ltd (SAIL) today announced that the company is set to achieve the status of a 'virtual' zero debt company in 2004-05.

"At the end of 2004-05, SAIL's market borrowings stood at around Rs 5,800 crore, while its short-term deposits are also of a similar magnitude, which implies that the company has 'virtually' attained zero debt status," a SAIL press release issued here today said.

The release added that this status of a zero debt company is part of the company's strategic business plan, which enabled it to reduce borrowings to the level of its deposits in various banks.

"The outstanding loans could not be dissolved since they have been raised on a long term basis," the release said, adding: "SAIL did not acquire any fresh loan in the last two years and financed its entire voluntary retirement scheme during 2004-05 from internal accruals."

The release also said that the zero-debt status will have a special significance in view of SAIL's goal to have a debt-equity ratio of 1:1 even while investing around Rs 25,000 crore for capital schemes under its Corporate Plan 2012. The company expects to achieve record profits during 2004-05.

Continuing with its efforts to reduce the rate of borrowing, the company prepaid an amount of Rs 525 crore to a leading financial institution in the beginning of the last financial year on a negotiated settlement basis.

Substitution of higher interest bearing loans with lower cost ones, exercising call option and controlling fresh loans are some of the initiatives that helped the company to reduce its borrowing level and cost of finance.

SAIL's spokesperson said that the improvements in the company's financial performance are closely linked with the high level of physical performance that saw the company maintaining its average capacity utilisation at 104 per cent and setting records in production of value added products.

With record production of finished steel at 9.28 million tonne, the public sector steel giant achieved eight per cent growth in its domestic sales.

V S Jain, chairman, SAIL, said, "We have come this far on the strength of our sustained efforts to improve internal efficiencies supported by buoyancy in market. Strengthening of the company's financial foundation will instill greater confidence to accelerate our growth."