Essar Steel planning to bring in strategic investor to cut debts
Debt-laden Essar Steel is considering to include financial/strategic investors as part of its management restructuring plan. The company met the promoters, the Ruias, and lenders earlier this week, and discussed bringing in more funds and restructuring its existing debts. “The promoters of the company reiterated their commitment to infuse additional funds to support the company’s operations and improve the capital structure, while emphasising that no further funding was required,” Essar said in a statement. Several Indian banks led by State Bank of India (SBI) are believed to have summoned Essar Steel and have asked it to start repaying the debts or be ready for a forced change in management. The banks are holding discussions with Bhushan, Electro Steel, Essar and Visa. The Indian steel major is believed to be exposed to Rs.40,000 crore debt, out of which banks have already refinanced Rs.15,000 crore under the 5:25 scheme. The scheme will enable the company to repay the amount over a period of 25 years. Essar has recently appointed SBI Capital Markets and ICICI Securities to find strategic investors to reduce its existing debt. “During the meet with the lenders, Essar Steel apprised the banks of the significant improvement in its all-round performance. This is due to steep fall in gas prices, cost reduction initiatives, a rebound in steel prices post the MIP and other measures initiated by the government. All these factors have resulted in a significant improvement in the margins of the company,” the company said. According to Credit Suisse, Zurich-based financial services company, Essar Steel’s total debt was Rs.36,303 crore in 2015-16. Last year, Bank of India (BOI) had classified the steel-major as a non-performing asset. The Indian steel producers had in past approached the government for a financial package, which, Essar Steel says, is according to the requirements of the industry. “Essar Steel representatives reiterated that the performance of the company suffered during the last 3 years due to several external factors that were beyond control, particularly the cancellation of committed natural gas allocations by the Government of India which forms the main feedstock for part of the steelmaking process,” the company said.
March 26, 2016 | 04:00pm IST
to success.