Jindal Steel & Power is considering a breakup plan as part of a restructuring to trim its Rs 42,000-crore debt as well as boost investor's confidence in the company, reported Bloomberg.
The steel major is planning to split its steel, power and international businesses into three separate entities, chairman Naveen Jindal said in an interview. The plan, however, would need the approval of lenders, regulators and the board, Jindal added.
According to the breakup plan, the steel unit would include the coal mines, while the international business would include the Oman steel plant. The company will seek to progressively sell about 30 percent of the Oman unit, which may partly be achieved through an initial public offer, over two to three years.
The company plans to engage with potential buyers in December and hopes to conclude a deal by March.
The move comes after the steelmaker has come back from the brink of bankruptcy. The firm now wants to get its debt ratio down to two times pre-tax earnings, from about five times now, over the next four or five years, Jindal said in the interview dated August 30.
In FY19, the company aims to cut debt by 15 percent. “We are going to be really, really conservative. There is no question of taking more debt,” Jindal said.
The company's shares have risen 61 percent in the past year, owing to a global steel industry revival, making it the best performer on the 10-member S&P BSE Metal Index, the report said.
The restructuring of Jindal Steel’s coal mining operations in Australia may also be on the anvil, but there’s no hurry. "Coal prices are very good, so if we get a good price, we can look at that," Jindal said.
In 2014, the Supreme Court had canceled most permits granted earlier to coal mine companies terming the allocations arbitrary and illegal and ordered producers to pay for the coal they had already extracted. This is one of the reasons that forced the company to borrow huge amounts to sustain additional levy.
“We got into this situation because we had to borrow almost a billion dollars to pay the additional levy and then to complete the plant,” Jindal said, adding that when such things happen, one has no option but to carry on and find ways to survive without it, which they have done successfully.
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