Ruia-owned Essar Shipping is in the process of converting R700-800 crore of loans to dollar loans, as the debt-laden company looks to pare interest costs amidst a slump in the shipping sector.
?We are making progress on the conversion of rupee debt to dollar debt. We are in dialogue with some banks here and abroad to redo the debt,? Essar Shipping?s managing director AR Ramakrishnan said. ?We are hoping that, in the next couple of months, we will make some progress. There are a couple of big loans in the range of Rs 700-800 crore, that we are trying to convert.?
Indian companies have been trying to convert their loans into dollar loans as interest rates abroad are lower than that in India. The Essar Group companies, which include Essar Oil, Essar Steel and Essar Ports have a combined debt of more than R80,000 crore.
The company is in the process of restructuring its R5,500-crore debt, which includes extending the tenure of payment, converting rupee loans to dollar and bringing down the interest rates of loans. ?Deleveraging the debt and bringing down finance costs is a major focus area for us,? said Ramakrishnan.
Indian banks, as well as foreign banks, have been cautious of lending in the shipping sector, said Ramakrishnan. Banks and lenders are only keen to lend to shipping firms if they see some contracts in the company?s portfolio. Traditionally European banks were the only ones lending to shipping companies, but it?s only in recent times that Indian banks started doing so.
Added to the debt load, the company is facing challenges in the already beleaguered shipping sector with slumping freight rates and a slowdown in the world economies. The freight rates are expected to be depressed at least till the middle of 2013 when new ship deliveries ease, he said.
But Essar Shipping has managed to keep its head above water with the help of long-term contracts and its oilfield services business.
It gets about 25% of its revenue from the oilfield services business with its semi-submersible rig?Essar Wildcat?clocking $2,85,000 a day.
The rig, which is contracted with US exploration company ConocoPhillips, has completed one year in the partnership.
?The oilfield services market is showing good prospects and has substantially firmed up in the past one year,? Ramakrishnan said. In the current quarter, the company has a couple of rigs that will be operational, which will add to the revenues. About 80% of the company?s contracts are long term, which keeps prices fixed irrespective of which way the spot prices sway.
For the second quarter ended September, the company?s loss narrowed and its revenue rose 31%. In the last one year, the company?s share gained about 8% in value.