Lenders to Bhushan Steel are satisfied with the company’s efforts at reviving the business and have given the debt-laden integrated steel company time till June before another review, sources privy to its top management’s meeting with the lenders over Tuesday and Wednesday told FE.
“As of now we are comfortable with the performance of Bhushan and the cash flows that it is generating. We have decided to continue lending to it as an ongoing concern and will review the debt at the end of the June quarter,” a senior banker with a leading public sector bank (PSB) said.
Last year, bankers had agreed to restructure its loans under the Flexible Structuring of Long Term Project Loans to Infrastructure and Core Industries, popularly known as the 5/25 scheme.
“Lenders through the various meetings (steering committee and Joint Lenders’ Forum) have approved long term viability and agreed to structure the debt in accordance with extant guidelines of RBI,” BB Singal, chairman, Bhushan Steel, had observed in the company’s FY15 annual report.
Introduced by the central bank in 2014, the restructuring plan allows banks to extend the tenor of a loan to infrastructure projects, thereby reducing the repayment burden on companies.
The plan was introduced as the RBI felt that a fear of asset liability mismatch is stopping banks from providing long-tenure financing to infrastructure projects, thereby putting pressure on their cash flows and in some cases, making them unviable.
Steel manufacturers have been reeling under the sharp fall in prices globally and also the jump in imports into the country. To help the domestic industry from ‘serious injury’, the Ministry of Commerce had, last September, imposed a 20% safeguard duty on various categories of steel imports.
A marginal improvement in Bhushan Steel’s operational performance was visible in Q3FY16, when its net loss increased by 53.5% (Y-o-Y) to Rs 697.15 crore, it was largely on the back of its interest expense rising by 97.5% (Y-o-Y) to Rs 1,145.5 crore.
As of FY15, Bhushan Steel had total consolidated debt of R38,529.3 crore, and interest expense of Rs 2,494 crore.