Lenders to Monnet Ispat and Energy (MIEL) have lent the loss-making steel company additional funds to the tune of R1,720 crore after the company delayed servicing its loans by 60 days after the due date. The fresh financial
support comprises loans of R800 crore and non-convertible debenture (NCDs) worth R920 crore, a banker close to the development said.
The company’s consolidated net debt-across its businesses of steel, mining and power, stood at close to R10,611 crore as on March 31, 2014. The firm’s bottom line dropped a sharp 72% to R66.63 crore in FY14; for the nine months to December 2014, it reported a loss of R303.5 crore after incurring finance costs of R388.58 crore.
With the fresh loans, Monnet will owe banks an estimated R8,200 crore; the decision to add to the exposure was taken at a joint lenders’ forum (JLF). Should the company fail to service the loan within 90 days of the due date, the account will turn into a non-performing asset (NPA); right now it is classified as SMA-2 or a special mention account which is why it triggered a JLF.
Bankers in the consortium pointed out that the company’s consolidated debt has increased three-fold over the last three years. At the end of March 14, the debt stood at R10,611 crore compared with R3,196 crore at the end of FY11, while the debt equity ratio was at an elevated 3.68. Monnet incurred a capex of R3,205 crore in FY14.
Monnet Ispat did not respond to phone calls or emails for this story.
Monnet Ispat moved from being a sponge iron player to an integrated steel producer after the commissioning of its 1.5 million tonne per annum (mtpa) steel plant in Raigarh in 2013-14.
Its existing facilities are spread across Raipur and Raigarh and it has interests in the power and mining sectors.
Monnet is among the many stressed medium-sized steel firms that expanded aggressively — with the help of borrowings — when loans were easier to access. Its earnings have been under pressure over the last two years owing to subdued demand for steel, higher costs in ramping up capacity and high interest and depreciation costs. The company’s market capitalisation is Rs 357 crore. The Monnet Ispat stock closed down 3% at Rs 53.80 on the BSE on Wednesday.
An official from a public sector bank that has lent to Monnet Ispat told FE that the “company has also been looking to offload its power business for sometime now to reduce its debts”. The banker said the power subsidiary’s power project in Angul, Odisha, has faced challenges like late approvals and delayed land acquisition resulting in time and cost over-run of the project.
Monnet Ispat’s annual report of 2013-14 notes that the revised cost of power project in Angul is pegged at Rs 7,117 crore instead of Rs 5,092 crore earlier. Similarly, the commercial operation date of the project has been revised to September 2015 instead of December 2012 earlier. The company through its subsidiary, Monnet Power, is setting up a 1050 MW of coal-based power generation plant at Angul, Odisha. It bagged two coal mines in the recent auctions held by the government for its sponge iron and power plant.
Pranav Nambiar & Pallavi Ail