COVID-19 lockdown effect: SAIL faces cash flow problems; inventory piles up to 2 million tonne

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Published: April 25, 2020 12:01 AM

Chaudhary said steps taken by the government like waiver of the fixed-demand charges from the power company came handy for SAIL in the present trying times.

SAIL is also sitting on a huge debt.SAIL is also sitting on a huge debt.

As domestic sales dried up in view of the lockdown to contain the Covid-19 pandemic, state-run steelmaker SAIL is facing cash flow problems amid piling up of inventory, which touched 2 million tonne on Thursday.

“Yes, certainly cash flow is a problem as there are no sales in the domestic market and we are depending only on the cash flow which we are getting from our debtors,” SAIL chairman Anil Kumar Chaudhary told a news channel.

Chaudhary, however, exuded confidence of a pick-up in demand once the lockdown is lifted. Though sectors like automobile and engineering may take time to recover, he said, he remained bullish on the construction and infrastructure sector in the short-term, which would take care of its inventories.

“There is no outlet in the market, particularly in the domestic market, and when the production is going on, may be at a 50% level, some inventory has to happen.

Today, we are sitting on an inventory of close to 2 million tonne, as of yesterday. As far as (strain on) working capital is concerned, I think it is there for every company, the cash flows are in difficulty. Our fixed cost is around Rs 1,500 crore per month,” he said.

Chaudhary said steps taken by the government like waiver of the fixed-demand charges from the power company came handy for SAIL in the present trying times.

To tide over the liquidity crunch, Chaudhary had in a written message addressed to employees on April 16 asked them to review each expenses going forward and conserve cash, follow-up rigorously with the customers to promote sales and realise outstanding dues. They were also asked to focus on production at the least possible variable cost.

SAIL is also sitting on a huge debt. According to Bloomberg, as on September-end, 2019, the PSU had Rs 48,181.35 crore, up from Rs 41,433.88 crore as on March-end 2019. Talking to the news channel, Chaudhary, however, said that debt was not a problem for the company at the current stage.

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