Mittal brothers-promoted Ispat Industries, which has been in trouble following the downturn in the steel industry, will finally start repaying its huge debt of about Rs 6,500 crore from April 2010. ?The company will pay approximately Rs 750-800 crore every year according to the scheduled agreed to with its lenders, Anil Surekha, director-finance of the company told FE.
The company has a net debt of about Rs 6,500 crore as on September 2009 and the average cost is 10%. Declining to give specifics on what the company?s cash flows are expected to be in the coming year and how the company will repay its debt, Surekha said ?Our cash flows will be adequate enough to service the interest and repay our loans.?
The recession last year impacted the company, compelling its lenders to reschedule the installments of term loan falling due between October 2008 and March 2010. Ispat industries recently got shareholders? consent for lenders to acquire 19.53% stake by subscribing to preferential shares in case of a default. If the option is exercised, creditors? stake in the company will increase to 30.39% from 10.86% currently.
According to Surekha, the company lacks captive mines producing iron ore and coal that increases its cost of production.
Ispat Industries had spent half of its revenues to buy raw materials in 2008-09 from the total sales of Rs 9,063 crore.
However, it has now chalked out expansion in power, coke oven, pellet plant and iron ore mines that will lead to savings of more than Rs 1,000 crore per year for the company. ?All this expansion put together, our savings will be Rs 1,000 crore plus by 2010-11. Moreover, we expect our ebidta (earnings before interest tax and depreciation ) to increase to 35% by 2010-11 from 17% at present,? reveals Surekha.
Industry watchers say, with huge borrowings it could take almost 4-5 years for Ispat to turn around. The highly capital-intensive steel sector, is witnessing steel companies being highly leveraged as downturn takes a toll on the huge expansions made by the manufacturers. Players like Tata Steel, JSW Steel, Ispat Industries JSL Ltd have either raised money to repay their huge loans or have restructured their debts.
Fourteen creditors led by IFCI had in May approved second corporate debt restructuring package for Ispat allowing the firm to pay their debts between 2010 and 2018. As it is, consequent on two CDRs, Ispat?s promoters, Pramod and Vinod Mittal, have already pledged 39.1 % stake that is 95 % of their 41.14 % stake to the consortium.
According to Surekha, the company doesn?t need more borrowing for any of our expansion now. We have rolled out separate companies for our power, coke and pellet expansion and cash outgo from Ispat will be not more than Rs 75-80 crore in the coke oven plant and pellet plant. We will be a minority stake holders in this with a majority stake remaining with the outside partner.
The company posted a net loss of Rs 79.14 crore as on September 2009 along with a dip in its income to Rs 3,223 crore from Rs 2,047 crore in September 2008. Ispat is a producer of flat products producing about 3.3 mtpa of hot rolled coil at its Dolvi plant in Maharashtra.
