 "Ramp-up, asset monetisation to help turn around fortunes of RINL")
Ahead of disinvestment, a series of measures are being taken to set the stage for the turnaround of Rashtriya Ispat Nigam Ltd (RINL).
While non-core assets would be monetised to help reduce debt and invest in working capital, the steel public-sector undertaking is working towards achieving full capacity utilisation at the 7.3 million-tonne plant in Visakhapatnam.
Atul Bhatt, chairman and managing director, said the sale of non-core assets -- a forged wheel unit in Raebareli, Uttar Pradesh, and a 22-acre land parcel in Vizag city -- was expected to be completed before the end of this financial year.
The asset monetisation process is being driven by the Department of Investment and Public Asset Management, and RINL hopes to get Rs 3,000-4,000 crore.
The money would be ploughed back into the company to reduce debt and invest in working capital so that it can turn around, Bhatt said on the sidelines of a conference on steel organised by Steel & Metallurgy.
RINL registered a turnover of Rs 15,618 crore (provisional) during the period April 2022 to December 2022 and the company made a net loss of Rs 2,751.34 crore (provisional) up to December 2022, according to figures from the Ministry of Steel Annual Report 2022-23.
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RINL had debt of around Rs 23,000 crore and Bhatt said it was “unsustainable”. However, he hoped the monetisation of assets would be completed this financial year.
“Maybe next year we can look at profit,” he said.
The turnaround hinges on the sale of non-core assets, debt reduction, and working capital infusion. In 2021-22, RINL posted a profit of Rs 913 crore after six years. But the subsequent year (FY23) was difficult for most steel producers, pointed out Bhatt.
There was a global recession, steel prices dropped, and then an export duty was imposed by the government, resulting in a glut of steel in the Indian market.
Bhatt said RINL did not have captive mines, which increased the cost of production.
“We are spending about Rs 6,000 more per tonne on iron ore; on the cost curve, we are on the higher side.”
Iron ore and coal are key inputs in steelmaking. However, RINL resorted to buying coal from Russia. It was sourced mostly from Australia earlier and was more expensive. Bhatt said Ebitda (earnings before interest, tax, depreciation, and amortisation) had improved in the past few months.
The steel unit recently commissioned new oxygen capacity, which would enable it to run facilities more efficiently. In 2021-22, RINL produced 5.5 million tonnes (mt) out of a capacity of 7.3 mt. And the focus right now is to run the plant at full capacity, Bhatt said.
Full capacity utilisation and a turnaround could help in the valuation of the country’s first shore-based plant in the strategic sale process. Bhatt, however, declined to comment on the disinvestment process for RINL.
In January 2021, the Cabinet Committee on Economic Affairs (CCEA) had given “in-principle” approval for 100 per cent disinvestment in RINL through strategic disinvestment by way of privatisation.
In April this year, the Ministry of Steel clarified in response to reports of a freeze on the disinvestment process that it was “under progress” and efforts were being made by the company and supported by the government to improve the performance of RINL and keep it as a “going concern”.