New Delhi: Indian stainless steel maker JSL Stainless Ltd expects to come out of its corporate debt restructuring (CDR) by September 2012, much before the original deadline of March 2020, as the new plant in Orissa is expected to stabilize and enhance cashflows, a top executive said.
JSL, which has a total debt of about Rs7,500 crore including about $600-700 million in overseas loans, got its lenders to recast debt last year after a global downturn curtailed its expansion plans and made repayments difficult.
The CDR brought down interest cost and stretched repayment period to a maximum of 10 years for JSL.
“By September 2012, we should be exiting CDR (corporate debt restructuring),” Arvind Parakh, director-finance, told Reuters in an interview on Wednesday.
The 1-million-tonne steel capacity in Orissa, partly operational now and likely to completely ramp up by November, will double the firm’s topline in FY13, boosting cashflows and profits and helping the firm exit CDR, Parakh said.
JSL has another facility in Haryana with 780,000 tonnes capacity.
Exiting the CDR will raise the average borrowing cost for the firm to about 10-12% from 8% now and the firm plans to refinance part debt with cheaper foreign currency loans to keep the overall cost low.
“As a strategy we will have to refinance our existing debt to keep the average cost down to around 9-9.5%,” Parakh said.
The CDR puts a restriction on the company’s expansion and capital expenditure, and an exit will unshackle it.
“We will be able to further double our capacity and look for further acquisition and expansion to take care of domestic demand,” Parakh said.
JSL invested about $1.5 billion to set up the new 1 million tonne facility at Orissa and can double the capacity there at an incremental cost of $500 million, Parakh said.
India produces and consumes about 2 million tonnes of stainless steel in a year and the industry is expected to grow at about 9-10% for the next 3-4 years as the country boosts spending on infrastructure and urbanization picks up, Parakh said.
Overseas mines opportunity
JSL is in talks with a few nickel mine owners in Indonesia to jointly set up a smelting facility to supply raw material to its steel plants in India, Parakh said.
“We have identified a few targets and these are just preliminary talks,” Parakh said. If a deal were to be struck, a smelting facility will require a total investment of $80-100 million, including an equity of $15-20 million, he added.
JSL is aiming to achieve a total backward integration and is therefore looking at a strategic tie-up with nickel and chrome mine owners overseas, but has no plans to acquire coal or iron ore mines overseas, Parakh said.
Nickel, a key raw material for stainless steel, has been stable around $22,000-$23000 per tonne for the past 2-3 months. Parakh said he expects raw material prices as well as stainless steel prices to remain stable in the near future.
JSL sees a 15-20% growth in topline but a flat profit for the current fiscal year as new capacity would boost volumes but higher depreciation and interest charge would weigh on profits, Parakh said.
Shares in JSL, valued at about $450 million, were trading up 1.93% at Rs105.50 in late trade on Wednesday in a Mumbai market that was up 1.11%.