Ruias to close Essar Steel's asset sale by FY16-end
2 November 2015
The Essar group has drawn a plan to revive the financial metrics of Essar Steel, its struggling steel business, through sale of assets worth Rs 11,200 crore by March next year. Besides, the promoters will infuse another Rs 1,500 crore into the company which will be used for repaying lenders.
The group's asset-sale plan is exclusive of the London-based holding company's plans to sell a 49 per cent stake in Essar Oil to Russian oil giant, Rosneft, in an all-cash deal worth $2.8 billion, for bringing down its debt.
The group's aggression in bringing down the debt of Essar Steel stems from the fact that rating agencies have downgraded its Rs 30,500-crore debt into default category, causing some worry among its bankers, which have asked Ruias, the promoters of the group, to expedite their asset-sale plan.
Top company officials said Essar Steel was facing the brunt of falling steel prices, lack of gas supply from the Krishna-Godavari basin and damage to its Kirandul-Vizag slurry pipeline by Naxals in October 2011. The lack of gas supply brought down the capacity of the company's Hazira plant to 40 per cent and caused a Rs 4,500-crore hit on Essar Steel's finances. Besides, delays in getting environmental clearance for the company's second slurry pipeline in Odisha resulted in non-availability of pellets for the ramp-up of the Hazira steel plant and had an impact of another Rs 2,500 crore on the company.
Essar Steel is not alone. All Indian steel companies, including the big ones like Steel Authority of India, Tata Steel, JSPL and JSW Steel, have been going through a difficult phase due to cancellation of coal mines, falling steel prices and dumping of cheap Chinese steel until recently.