Net sales rose sharply from Rs 460.36 crore to Rs 686.24 crore, while other income increased from Rs 2.55 crore to Rs 6.50 crore during the period.Announcing the quarterly results, Essar Steel managing director Jatin Mehra said that steps taken by the company to reduce costs have yielded results during the first quarter.

"The benefits of the cost-reduction programme will be fully harnessed during the course of the current fiscal year when the cost is expected to be lower by Rs 1,500 per tonne compared to 1999-2000," he added.

Essar Steel, which is in the midst of a major debt restructuring, has worked out a two-pronged strategy to reduce its burden by around Rs 1,200 crore in the current fiscal. While on the one hand, the company proposes to bring down the size of its debt, on the other, it has proposed to lengthen the maturity profile.

According to Essar Steel director Prashant Ruia, the company has already approached its lenders with a proposal to extend the maturity of the debt to eight years, from the present five years. "The lengthening of the debt maturity will help correct the mismatch in financing the project. Financial institutions (FIs ) have agreed in-principle to clear the proposal," Ruia said, adding that the move will lower interest burden by around Rs 250 crore per annum.

Essar Steel, Ruia claimed, has significantly improved its working capital management with inventory levels falling to 20 days from around 40 days earlier. The company has also brought down the maturity of receivables from 90 days to 30 days.

Essar Steel, which hived off its pellet business into a joint venture with Stemcor of UK, has reduced its debt component by a whopping Rs 633 crore as a result. Essar Steel's long-term debt currently aggregate to Rs 4,400 crore.

Post-restructuring, Essar Steel holds redeemable preference shares of Rs 312 crore in high grade pellets. Besides, the company has an equity investment of Rs 217 crore in Essar Power, which, company officials say, is currently valued at Rs 330-350 crore.