While the company is looking at making acquisitions to take its steel capacity to the targeted 40 MT, it wants to keep a tight control over key financial ratios.
JSW Steel, which saw its financial ratios go awry last year, is focused on lowering its debt in the new fiscal. While the company is looking at making acquisitions to take its steel capacity to the targeted 40 MT, it wants to keep a tight control over key financial ratios. The company has raised USD 500 million to refinance expensive foreign currency loans.
JSW Steel is not only looking at bringing down debt but also its overall finance cost. The company’s weighted average finance cost is 7.19 percent and it intends to bring this down to 7 percent by end of FY18.
In 2016, these ratios went haywire due to exceptional market conditions and provisioning of the investment the company made overseas. The company has guided that it would like to bring debt/EBITDA down to 3.75x and debt/equity 1.75x levels over time.
Explains JSW Steel’s Managing Director and Group CFO, Sheshagiri Rao, “In FY17, we worked on bringing down the ratios. In December 2016, we brought down debt/EBITDA to 4x and debt/equity 2.1x. Our aim is to bring financial ratios down to guided levels.”Any acquisitions in future will have a capital structure that will comply with these ratios. The company does not feel the need to raise money to fund any acquisition as in the nine months period ended December 2016, it had free cash flows of Rs 5000 crore. Rao does not expect debt to increase in the near-term.