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Essar Steel has taken a series of steps to strengthen its balance sheet. While the consortium of lenders are yet to approve a debt restructuring plan under the RBI approved 5/25 route, Essar has done its bit to improve financials. From asset sales to converting a part of its rupee debt to dollar debt, Essar Steel has taken a series of steps to cut debt and costs.
For starters, the holding company has infused equity of Rs 1300 crore. It has also sold a majority stake in its Odisha slurry pipeline & oxygen plant for Rs 4,850 crore to a clutch of investors including Srei Infrastructure and Edelweiss. Essar Steel was in the news recently after HDFC Bank sold a loan down to asset reconstruction companies.
The company wants to monetise the Vizag slurry pipeline and coke oven for Rs 7000 crore in the current fiscal. These steps together will unlock Rs 12,000 crore of cash, which will be used to strengthen the balance sheet.
Essar Steel had a long term debt of Rs 38,000 crore till last year, which is now down to Rs 30,000 crore. Of this long-term debt, Rs 15,000 crore is domestic rupee debt and approximately $2.2 billion is dollar debt. Explains Firdose Vandrewala, executive vice chairman of Essar Steel, "With the dollarisation of the debt, the company has lowered its interest cost from 12% to 9%."
Over the last one year, Essar Steel has remained focused on lowering costs and improving financials so that its ability to service debt improves. The company's revenues in FY15 have grown 20% year-on-year to Rs 17,162 crore and operating income rose 188% year-on-year to Rs 5389 crore.
Operating margins doubled from nine% a year ago to 18%. The company's exited FY15 with a total volumes of 3.31 million tonnes of steel, of which 2.76 mt was sold in domestic market and 0.56 mt was exported.
For starters, the holding company has infused equity of Rs 1300 crore. It has also sold a majority stake in its Odisha slurry pipeline & oxygen plant for Rs 4,850 crore to a clutch of investors including Srei Infrastructure and Edelweiss. Essar Steel was in the news recently after HDFC Bank sold a loan down to asset reconstruction companies.
The company wants to monetise the Vizag slurry pipeline and coke oven for Rs 7000 crore in the current fiscal. These steps together will unlock Rs 12,000 crore of cash, which will be used to strengthen the balance sheet.
Essar Steel had a long term debt of Rs 38,000 crore till last year, which is now down to Rs 30,000 crore. Of this long-term debt, Rs 15,000 crore is domestic rupee debt and approximately $2.2 billion is dollar debt. Explains Firdose Vandrewala, executive vice chairman of Essar Steel, "With the dollarisation of the debt, the company has lowered its interest cost from 12% to 9%."
Over the last one year, Essar Steel has remained focused on lowering costs and improving financials so that its ability to service debt improves. The company's revenues in FY15 have grown 20% year-on-year to Rs 17,162 crore and operating income rose 188% year-on-year to Rs 5389 crore.
Operating margins doubled from nine% a year ago to 18%. The company's exited FY15 with a total volumes of 3.31 million tonnes of steel, of which 2.76 mt was sold in domestic market and 0.56 mt was exported.
