Essar Steel to raise $2 billion to cut rupee debt

Essar Group company Essar Steel is planning to raise about $2 billion in overseas markets by the end of first quarter of the current financial year, in order to retire costly rupee debt.

Essar Steel hopes to complete the $2 billion overseas borrowing by the end of the current quarter, thereby reducing in interest outgo.

Though conversion of rupee loans into dollar debt, the company also hopes to extend the tenor of the loans to an average 10 years.

This will result in annual savings of around Rs1,200 crore while the average interest cost would come down to around 6-7 per cent from the current 12 per cent.

Essar Steel has a total debt of around Rs26,000 crore.

The company also is increasing its focus on exports in the current financial year by taking it to 30 per cent of the total sales from the present 25 per cent.

Essar Steel had, in June last year, raised $1 billion through external commercial borrowings, with an annual cost saving of around Rs450 crore.

Meanwhile, the company hopes to improve sales in the current financial year with higher domestic steel demand and a simultaneous increase in capacity utilisation levels.

It plans to double capacity utilisation of its 10-million tonne Hazira plant, while reducing interest costs and focusing on higher margin sale of value-added products and commissioning of its slurry pipeline.

Apart from reducing freight cost, the slurry pipeline will also improve the availability of material for pelletisation, which in turn helps the downstream.

Essar Steel, which has a production capacity of 14 million tonnes per annum (MTPA), aims to turn profitable by year-end.

The company has a presence in India, Canada, the US, the Middle East and East Asia.