Lenders to Kolkata-based Bhushan Power & Steel (BPSL) have given the company additional loans of close to Rs 5,000 crore, according to bankers familiar with the matter and documents accessed by FE.
Bankers have an estimated exposure of about Rs 35,200 crore, excluding external commercial borrowings of about $775 million. SBI is the lead banker of the consortium of 15 lenders that has provided additional funds consisting of term loans; these are meant for the implementation of Phase VI of BPSL’s integrated steel and power plant in Odisha. BPSL commissioned the 3.5 mtpa plant in 2005.
The privately held company is managed by Sanjay Singal — elder son of Bhushan Steel’s founder Brij Bhushan Singal. Sanjay’s brother Neeraj is troubled company Bhushan Steel’s promoter. A total of 31 banks, including one foreign bank, have exposure to BPSL, with PNB the lead banker for the working capital consortium. Bankers told FE the account was classified SMA-2 or special mention account in late August last year, following a delay in repayments 60 days beyond the due date. That had triggered the formation of a joint lenders’ forum.
“The company had also sought an export promotion bank guarantee (EPBG), but the banks refused the grant it,” a lender privy to the discussions told FE. Under an EPBG, banks provide a guarantee to a company’s exports against which customers pay an advance, which is used to pare term loans.
While the company reported gross revenue of R11,288.7 crore for 2013-14, a rise of 18.6%, net profits rose at a slower 11.1% to R635.5 crore since it paid out R1,438 crore as interest costs, higher by 33% over FY13.
BPSL’s debt-to-equity ratio stood at R2.90 on March 31, 2014. BSPL’s performance in FY15, analysts point out, could be very weak given how steel prices globally have collapsed, driving down prices in the home market.
Imports into India have risen by about 70% in FY15 to around 9.3 million tonne, an all-time-high following the relative appreciation of the rupee against the Yuan, the yen and the rouble, pressuring revenues of local steelmakers who are pushing for higher import duties. While global prices of iron ore have dropped by nearly 50% over the past year, they haven’t fallen as much in the local market.
BPSL said in its FY14 annual report, it had plans to set up an 900 MW captive power plant and 3 million tonne steel plant in Jharkand. While the initial outlay for the project had been envisaged at R10,500 crore, the number would need to be revisited, it noted. The company also put on hold plans for an integrated power and steel plant in Chhattisgarh, saying, “(it) will be reviewed after the commissioning of the facilities under Phase VI at Odisha,” according to the FY14 annual report.