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Neeraj Singhal-led Bhushan Steel said it would focus on capacity utilisation to ramp up operating profits.
“Since there will be no pressure of debt repayment for the next four years, we plan to focus on raising the top line. We will focus on catering to large clients and original equipment makers of the automobile segment as well as the white goods market,” Nitin Johari, chief financial officer, told the Business Standard. “For this, the capacity utilisation will also be raised to over 90 per cent from the current 65-68 per cent,” he added. Early this month, a joint lenders’ forum agreed to refinance Bhushan Steel's Rs 35,000 crore (as on March 31, 2014) debt under the 5/25 scheme for infrastructure projects. Under this scheme, banks can extend loan repayment periods up to 25 years, with an option of refinancing the loan every five years.
Though the New Delhi-headquartered company is looking to increase its top line, it has no plans to alter its sales ratio of 80:20 for the domestic-export market. Within the domestic market, too, where the debt-ridden company has captured 40 per cent market share in the auto segment and 80 per cent in the white goods segment, Bhushan Steel has no plans to make extra efforts to grab additional share.
“Since we are mainly into value-added products and deal in niche sections of auto and white goods, products are sold at a premium price. This should help us (the company) churn higher revenues,” explained Johari.
After witnessing diminishing bottom lines for three consecutive years, which was mainly due to increased interest outgo and stagnating revenue, Bhushan Steel reported losses in the year ended March 31, 2015. The company reported losses all through the four quarters, taking the bottomline to a net loss of Rs 1,257 crore in the year gone by.
On the expenses front, there is little that Bhushan Steel can do without a captive iron ore source. Hence, its operating profits will be impacted by the price trend.
With a total capacity of 11 million tonnes, the secondary steel producer has three manufacturing units at Sahibabad in Uttar Pradesh, Khopoli in Maharashtra and Meramandali in Odisha.
In terms of products, the company is mainly into galvanised coil and sheet, high tensile steel strapping and colour coated coils.
Though the company has a plan in place to improve its topline, given the subdued demand scenario in the domestic market amid increasing cheap Chinese imports, achieving the set revenue targets could be difficult.
“The difficult phase for domestic steel industry is expected to continue for the next one-and-half to two years,” admitted Johari. “Whatever steps have been taken so far by the government to improve the investment climate will take time to change into reality,” he added.
Some analysts voiced concerns over cheap Chinese imports. “Chinese imports are mainly flat steel products and these imports may not come down soon even after the (import) duty was hiked. Due to this, the company's profitability will remain under pressure in the coming quarters,” said an analyst with a local brokerage.
Mayuresh Joshi, vice president, institution, at Angel Broking, said, “It will take time and recovery is going to be painful for Bhushan Steel. Realisations could be lower since demand is weak.”
Some analysts also continue to see a downtrend in steel prices. “There is still some room for steel prices to fall further though prices have already fallen Rs 1,500-1,600 per tonne,” said Pritesh Jani, analyst with Religare Securities.
Meanwhile, Bhushan Steel continues to chalk out a plan to increase its cash flow through sale of non-core assets.
“In the year ended March, we sold non-core assets worth Rs 1,000 crore. In FY16, we are planning to sell non-core assets worth Rs 500 crore,” informed Johari refraining from revealing details of the assets it plans to sell.
While some heavily indebted companies have recently looked for strategic investors to bail them out of the tough business conditions, Bhushan Steel has ruled out this option for itself.
“Which investor would like to invest in a market like this? This is not the right time to get a strategic investor as the industry is not looking up at all. There is no plan to get an investor at present,” Johari said without stating whether the company would review its decision when the market improved.
Bhushan Steel has been in news for quite from time now for reasons other than its high debt. In August last year, Bhushan Steel Vice-Chairman and Managing Director Neeraj Singal was arrested in an alleged cash-for-loan scam involving the then Syndicate Bank Chairman and Managing Director SK Jain, who was later suspended by the government.
Recently, the Odisha high court slapped a fine of Rs 14 lakh on two Bhushan Steel executives for violating occupational safety and health norms.
“Since there will be no pressure of debt repayment for the next four years, we plan to focus on raising the top line. We will focus on catering to large clients and original equipment makers of the automobile segment as well as the white goods market,” Nitin Johari, chief financial officer, told the Business Standard. “For this, the capacity utilisation will also be raised to over 90 per cent from the current 65-68 per cent,” he added. Early this month, a joint lenders’ forum agreed to refinance Bhushan Steel's Rs 35,000 crore (as on March 31, 2014) debt under the 5/25 scheme for infrastructure projects. Under this scheme, banks can extend loan repayment periods up to 25 years, with an option of refinancing the loan every five years.
Though the New Delhi-headquartered company is looking to increase its top line, it has no plans to alter its sales ratio of 80:20 for the domestic-export market. Within the domestic market, too, where the debt-ridden company has captured 40 per cent market share in the auto segment and 80 per cent in the white goods segment, Bhushan Steel has no plans to make extra efforts to grab additional share.
“Since we are mainly into value-added products and deal in niche sections of auto and white goods, products are sold at a premium price. This should help us (the company) churn higher revenues,” explained Johari.
After witnessing diminishing bottom lines for three consecutive years, which was mainly due to increased interest outgo and stagnating revenue, Bhushan Steel reported losses in the year ended March 31, 2015. The company reported losses all through the four quarters, taking the bottomline to a net loss of Rs 1,257 crore in the year gone by.
On the expenses front, there is little that Bhushan Steel can do without a captive iron ore source. Hence, its operating profits will be impacted by the price trend.
With a total capacity of 11 million tonnes, the secondary steel producer has three manufacturing units at Sahibabad in Uttar Pradesh, Khopoli in Maharashtra and Meramandali in Odisha.
In terms of products, the company is mainly into galvanised coil and sheet, high tensile steel strapping and colour coated coils.
Though the company has a plan in place to improve its topline, given the subdued demand scenario in the domestic market amid increasing cheap Chinese imports, achieving the set revenue targets could be difficult.
“The difficult phase for domestic steel industry is expected to continue for the next one-and-half to two years,” admitted Johari. “Whatever steps have been taken so far by the government to improve the investment climate will take time to change into reality,” he added.
Some analysts voiced concerns over cheap Chinese imports. “Chinese imports are mainly flat steel products and these imports may not come down soon even after the (import) duty was hiked. Due to this, the company's profitability will remain under pressure in the coming quarters,” said an analyst with a local brokerage.
Mayuresh Joshi, vice president, institution, at Angel Broking, said, “It will take time and recovery is going to be painful for Bhushan Steel. Realisations could be lower since demand is weak.”
Some analysts also continue to see a downtrend in steel prices. “There is still some room for steel prices to fall further though prices have already fallen Rs 1,500-1,600 per tonne,” said Pritesh Jani, analyst with Religare Securities.
Meanwhile, Bhushan Steel continues to chalk out a plan to increase its cash flow through sale of non-core assets.
“In the year ended March, we sold non-core assets worth Rs 1,000 crore. In FY16, we are planning to sell non-core assets worth Rs 500 crore,” informed Johari refraining from revealing details of the assets it plans to sell.
While some heavily indebted companies have recently looked for strategic investors to bail them out of the tough business conditions, Bhushan Steel has ruled out this option for itself.
“Which investor would like to invest in a market like this? This is not the right time to get a strategic investor as the industry is not looking up at all. There is no plan to get an investor at present,” Johari said without stating whether the company would review its decision when the market improved.
Bhushan Steel has been in news for quite from time now for reasons other than its high debt. In August last year, Bhushan Steel Vice-Chairman and Managing Director Neeraj Singal was arrested in an alleged cash-for-loan scam involving the then Syndicate Bank Chairman and Managing Director SK Jain, who was later suspended by the government.
Recently, the Odisha high court slapped a fine of Rs 14 lakh on two Bhushan Steel executives for violating occupational safety and health norms.
