Moneycontrol
Apr 18, 2017 11:12 AM IST | Source: Moneycontrol.com

Jindal Steel bets on higher asset utilisation to nearly halve its Rs 45,000 crore debt

Uppal said the company was done with its capital expenditure plan and would now take up only those projects which cost less but were high yielding

Jindal Steel bets on higher asset utilisation to nearly halve its Rs 45,000 crore debt
Dhirendra Tripathi

Moneycontrol News

Jindal Steel & Power Ltd plans to almost halve its Rs 45,000 crore debt in four years through higher asset utilisation and asset sales, company’s MD and Group CEO Ravi Uppal told Moneycontrol in an interview.

“We are going to take a long pause. We are not going to add any more capacity. We will only be focusing on sweating the assets more and use all the earnings and savings to reduce the debt. Our basic target is that in the next three to four years’ time, I don’t want to say more or obvious although all efforts will be on. We should be in the range of Rs 25,000-Rs 30,000 crore which is an affordable debt,” Uppal said.

The company’s consolidated interest outgo in the first nine months (April-December) of the last financial year was Rs 2,560 crores, higher by 6 percent from the same period a year ago. During the same period, its EBITDA was higher by 22 percent to Rs 3,140 crores.

Uppal said the company was done with its capital expenditure plan and would now take up only those projects which cost less but were high yielding.

“The company will obviously try to go for much higher EBITDA. Our EBITDA actually came down quite dramatically in the years of crisis. We would like to see that we double our EBITDA in the next one or two years and we will reduce our interest cost. So whatever saving we have from EBITDA which is called your PAT, so PAT plus depreciation is the amount that you can use to return your debt. So depreciation plus PAT is your debt servicing. And we are going to use the amount for repayment of debt,” Uppal said.

Even as JSPL has reported losses for last eight straight quarters, it reported a much narrower loss for October-December. The net loss for the three-month-period came at Rs 455 crore, almost half of Rs 882 crore loss in the same period a year ago and 39 percent lower from Rs 747 crore in September quarter of 2016.

“Last quarter (October-December) was a turnaround quarter. I think we are starting a new trend. So the upward journey started from the last quarter.  So god willing, we should be following the same track quarter after quarter. We hope to break even soon. It could happen even earlier (than September quarter of 2017). It depends on prices in the market vis-à-vis costs etc. From our side, we are making every effort to see that JSPL turns around very quickly,” he said.

JSPL successfully completed refinancing of Rs 7,125 crores of debt in December under the 5/25 scheme. Under the 5/25 scheme, lenders can restructure their debt for up to 25 years with the flexibility of refinancing every 5 years.

“Refinancing option is always there. We have lived with, in the last couple of years, high-cost debt.  We are still paying 10.5 to 11 percent as a debt-servicing cost which is a huge burden. So we will now obviously like to keep our options open on refinancing,” Uppal said if the company was looking to refinance more debt.

Asked to explain what he meant by low-cost, high-yielding projects, Uppal cited the example of Barbil in Odisha where the company has a pellet plant and Angul where the company has a power plant, a sponge iron plant and will soon be commissioning a steel plant.

“In Angul they are going to bring iron-ore and also the iron-ore fines and pellets from outside. May be it comes from our Barbil plant which is about 400 km by track and so forth. So it makes eminent sense for us that we set up a slurry pipeline from Barbil to Angul plant. Today, it costs me for every tonne of iron ore and fines Rs 800 to Rs 900 per tonne to send it by train. If I set up a slurry line, my cost per tonne to bring to Angul from Barbil is Rs 80. I save Rs 700 per tonne,” Uppal said.

The company has mining assets in several foreign countries like a thermal coal mine in Indonesia, an iron-ore mine in Cameroon, a coking coal mine in Australia and a thermal/coking coal mine in Mozambique. Of these, only the Australia, South Africa and Mozambique mines are currently being commercially exploited, he said.

“Anything where we can get more value by using the mineral out of these mines, we might retain them and use it. If we feel that we will get a better valuation outside than our own mines, then we sell it. So I think it is very difficult to take a position.  Because so many factors depend upon the options you get in the market at a point of time,” he said.

While Uppal did not rule out divesting stake in those assets, he said there won’t be any distress sale as the company was on the “uptrend” now.
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