Essar Steel has reported profits of Rs 648 crore for the financial year 2015 compared to a loss of Rs 1,597 crore last year. The turnaround, amidst declining steel price, has happened due to operational efficiencies and asset sale worth Rs 4,850 crore. The companies operating margins doubled to 18 per cent due to cost cutting measures.
“Despite the negative impact of lower prices due to rising imports, the company was able to get a premium on its products over market prices. This was possible owing to the company’s strategy to move away from commodity grade steel to value-added grade steel. The company also benefited from somewhat lower input prices of basic raw material,” said Firdose Vandrevala, Executive Vice-Chairman, Essar Steel India.
The sales volume of steel products stood at 3.31 million tonnes, marginally up by 2 per cent compared to 3.24 million tonnes in the previous year. It sold 2.76 million tonnes in the domestic market, and 0.56 million tonnes in the export market. With dollarization of $2.2 billion, the company has reduced its finance cost from 12 per cent to 9 per cent. The Company plans to avail the 5/25 scheme of RBI to extend maturity by another 4-5 years. Essar Steel has a debt of Rs. 30,000 crore.
The holding company of Essar Steel has infused equity of Rs. 1,300 crore. Further the company has sold its Odisha Slurry Pipeline and Oxygen plant for Rs. 4,850 crores. In addition, the company proposes to monetise the Vizag Slurry pipeline and Coke Oven for Rs. 7,000 crores in the current fiscal.
“The above measures will provide the company approx. Rs. 12,000 crore which will be utilized to strengthen the balance sheet and meet all its financial needs,” Vandrewala said.
Prashant Ruia, CEO of Essar Group said that though there is no new capacity being added across the steel industry due to the slowdown, it is only a matter of time before things start picking up. “The economy needs to get back to growth levels of 6-7 per cent. The investment cycle is getting ready for that and this will have a direct impact on steel consumption,” Ruia said.