 "Asset sale may fetch Bhushan Steel Rs 3,000 cr")
Debt-laden Bhushan Steel says it is in the process of getting Rs 3,000 crore from sale and lease-back arrangements for two of its assets, oxygen and coke oven plants, in Odisha.
“We have sold the oxygen plant for Rs 1,000 crore and leased back, which will help reduce some liabilities. The coke oven plant (sale) is under process, which could translate to another Rs 2,000 crore,” said Nittin Johari, the director, finance.
With debt of Rs 40,000 crore, Bhushan had become a worry for banks. In August, the lenders decided to appoint an audit company to monitor the cash flow daily and an independent engineer to monitor operations. In all, 35 banks have a combined exposure, in both working capital loans and term loans.
“Banks are monitoring the operations. It’s working out well,” said Johari.
The sale and lease-back deals were also mooted by the lenders. Though the deal looks attractive, Bhushan would still have to pay lease rent for the assets. “These are long-term leases, 14 to 15 years,” Johari explained.
On November 14, the company had informed the stock exchanges that the board of directors had approved sale and lease-back arrangements for the coke oven plant and oxygen plant. It was the Odisha unit that landed Bhushan in trouble. First, it was the pace at which the company expanded capacity. In 2008-09, 0.3 million tonnes was commissioned. A second phase of two mt was completed in 2009-10. And, a third phase of 5.2 mt was commissioned in early 2014, after a considerable delay which took a toll on the finances.
In 2013, the Odisha State Pollution Control Board directed Bhushan Steel to shut its blast furnace, after an explosion during the trial run killed two workers and injured 16. That resulted in loss of production for about six months.
Helping Bhushan to get its act back is the fact that the bankers have extended the repayment schedule, under the Reserve Bank’s ‘5/25’ scheme. This allows the repayment period to be stretched up to 25 years, with periodic refinancing every five years.
“Reduction of debt is not part of the 5/25 scheme; it’s about aligning cash flows and liabilities. It also gives us time to ramp up capacity. Volumes have picked up by 20 per cent,” said Johari.
“If volumes pick up, cash flows will improve. The entire sector is in trouble and whoever has bigger debt is in a bigger problem,” an analyst said. For the September quarter, Bhushan’s total income was Rs 3,178 crore, compared to Rs 2,967 crore in the same period last year. The net loss widened from Rs 297 crore earlier to Rs 733 crore.
