The decision is likely to pose yet another hurdle for the steel company, which has till date received only Rs 70 crore from financial institutions, despite Rs 467 crore of additional assistance cleared over three months back. No Jindal official was, however, willing to discuss the tangle with IFCI.

Of the Rs 70 crore received by JVSL to restart operations--after a technical snag forced a shutdown last October--ICICI has extended a bridge loan of Rs 30 crore, while the Industrial Development Bank of India (IDBI) has forwarded Rs 40 crore (after netting of interest dues).

The balance Rs 397 crore sanctioned, which includes Rs 74 crore cleared by IFCI, is expected to be disbursed after the issue of trust and retention (T&R) accountrelating to first charge on the company's receivables is sorted out with commercial banks.

While banks, which extend working-capital loans, have the first charge on receivables, the institutions are now seeking to share this due to their increased exposure in JVSL. The two parties are likely to settle for a pari passu charge on receivables.

JVSL has met most of the stringent conditions laid down by the institutions for the release of fresh funds. While a lender's engineer from the German engineering consultancy Roland Berger has been appointed, PriceWaterhouse Coopers are the concurrent auditors.

The promoters--the Sajjan Jindal group--who were to bring in Rs 50 crore upfront, have extended over Rs 25 crore to the project, while the balance is expected to be brought in soon.

The steel company has proposed infusion of Rs 467 crore of additional funds from the financial consortium, of which ICICI has a share of Rs 167 crore.

The other institutions have sanctioned additional loans worth Rs 300 crore,which includes Rs 151 crore from IDBI, Rs 74 crore from IFCI, Rs 49 crore from the Life Insurance Corporation of India, Rs 17 crore from the General Insurance Corporation, and Rs 9 crore from IIBI.

The project cost has now gone up to Rs 5,215 crore, from the Rs 3,300 crore originally planned. While the debt portion has now ballooned to Rs 3,650 crore, the equity portion has risen to Rs 1,565 crore.

The project cost is set to increase by another Rs 300 crore, as JVSL has sought institutional approval of deferment of interest dues for the current fiscal. The institutions are yet to take a view on this.

INSIGHT
IFCI must sell assets to other FIs

IFCI has been working on selling off some of its assets to reduce its exposure to some of the sectors. In case IFCI feels that additional investment in JVSL is risky, the company should work on trying to sell its assets to other institutions which can take this additional exposure. This is also because the recommissioning of the Corex module hascome at the right time of the steel commodity cycle. Rising international steel prices have resulted in all steel producers, inculding JVSL, booking substantial export orders at realisations higher than the domestic realisations. This is bound to reduce the supply-demand gap for domestic markets and change the calaculations for viability of some of the steel projects in India.

Manish Saxena