After spending a massive Rs 37,500 crore in expanding capacities across its units in India, Essar Steel is now looking at options to bring down its borrowings.
The company is now looking at raising debt outside of India. Till recently it had considered listing itself on the London Stock Exchange (LSE). Essar Energy, another group company, is already listed on the LSE. Talking about accessing the debt or a possible listing, Amit Agarwal, CFO, Essar Steel, said: “As a company, one would always look at the opportunities that are good for us. We keep on talking, understanding whether there is an opportunity that exists.” He, however, categorically denied listing plans for the company and said, “The debt markets are better than the equity markets currently”.
Given the cheaper options in the debt market to raise money, Essar Steel is looking more inclined towards this possibility. Agarwal said, “RBI has also allowed companies to borrow in foreign currency and reduce the borrowing costs. We are also evaluating such opportunities. As a large, company we will evaluate all options.”
In an internal exercise, Essar Steel got itself valued from an independent bank recently which pegged it at $9 billion, or Rs 49,500 crore.
Essar Steel was listed on the Indian stock markets till 2007 when the promoters decided to take the company private. Investment banking sources say that till six months ago the company was looking at the London market for listing before it turned to debt markets, given the global equity markets’ scenario and subdued valuations.
The company has a 10-million-tonne steel plant in Hazira and beneficiation and pellet plants on the east coast of India. The total debt on its books is Rs 22,000 crore. JSW Steel, which recently announced the merger of JSW Ispat Steel with self, will have a total debt of Rs 25,200 crore after the merger. Currently at 10 million tonnes, the debt of JSW’s books is Rs 16,600 crore. Essar has spent Rs 37,500 crore in its expansion at its flagship Hazira Complex in Gujarat and for the pellet and beneficiation plants on the east coast of India. Taking into accounts its operations in the US and Canada, its total steelmaking capacity stands at 14 million tonnes.
Essar Steel made a loss of Rs 1,251 crore in 2011-12. Because of the rapid expansion, the interest costs on the loans have been weighing heavy on the company. In FY12 alone, the interest costs were up 68 per cent, at Rs 2,235 crore, when the company registered sales of Rs 16,056 crore.
