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JSW nears Ispat debt refinance deal

Steel News - Published on Thu, 28 Jul 2011

JSW Steel which acquired Ispat Industries in December last year, hopes to close the debt refinancing deal for the latter in the next couple of weeks.

Ispat, a loss making steel producing company earlier owned by Mr Pramod Mittal and family has a debt of close to INR 7,500 crore.

At the time of the acquisition, Mr Sajjan Jindal vice chairman and managing director of the JSW Group had said that JSW’s prime focus will be to refinance the debt of Ispat apart from bringing down input costs and making the operations more prudent.

Though Ispat, with a nameplate capacity of 3.3 million tonne per annum, is among the top six steel makers of the country, but had been operating at abysmally low capacity utilization due to mounting debt. After its acquisition, JSW officials had said that the company will make the plant profitable within a year.

Mr Sheshagiri Rao group chief financial officer of JSW Group said that “We are working on three to four areas to make the company profitable. The main are, sales rationalization, facilitating sourcing of key inputs like coke, pellet and power which will bring down the cost of production substantially and reduce interest on debt.”

Also, JSW has decided to confine Ispat’s operations within Maharashtra, thereby accruing VAT benefit of close to INR 1,400 per tonne by selling its products within the state. Ispat requires close to 225MW of power which is now being supplied by JSW’s power plant at Ratnagiri.

He said the company is very close to signing a deal to refinance Ispat’s debt and will make an announcement in the next few weeks.

Mr Rao said considering current market conditions and high domestic interest rates, it is difficult to source funds in India, adding there would be some savings in the refinance deal.

However, auditors of Ispat have highlighted certain issues and raised concerns over working capital of Ispat, so far an associate company of JSW Steel with 49.3% holding. According to JSW Steel’s annual report, Ispat auditors have drawn attention in their report regarding overdue sundry debtors amounting to INR 571.60 crore, non reconciliation of credit balances of INR 118.69 crore and raw material in-transit amounting to INR 104.83 crore. But the report also adds that Ispat’s management has assured that these issues will not have any impact on the numbers of the company.

(Sourced from DNA)

Posted By : admin on Thu, 28 Jul 2011
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