Mumbai, April 18: Jindal Vijayanagar Steel (JVSL) will spend Rs 1,727 crore on an expansion but is planning to raise part of the funds required for it abroad in a two-pronged strategy to boost capacity without being saddled with a pile of costly, profit-sapping loans.
In the pipeline is a foreign issue of $500 million, which could take the shape of an ADR, GDR, or convertible bonds. S. Rao, the chief financial officer, said the board has passed a resolution that will enable the company to raise the money when required. The issue will strengthen the capital structure and finance expansion, though the company will be free to use some of its internal cash reserves to bring down the debt level.
JVSL brought down its loans by Rs 1012 crore to Rs 3714 crore on March 31, 2004. Their average cost declined to 8.27 per cent for 2004-05 against 9.41 per cent in 2003-04.
The revamp of finances has gone hand in hand with a reorganisation of its corporate structure. As part of it, JVSL has appointed RSM & Co, ICICI Securities and Deloitte Haskins & Sells to gauge the feasibility of merg three entities with itself.
The firms are Euro Ikon Iron & Steel Pvt Ltd (blast furnace company), Euro Coke & Energy Pvt Ltd (coke oven battery firm) and JSW Power Ltd (power company). The consolidation is being pushed through as these companies are key to integrating the operations of JVSL, senior officials indicated.
They were speaking at an analysts' meeting held after JVSL declared its 2004-05 results, which was topped up with a 58 per cent jump in fourth-quarter profit at Rs 404.14 crore compared with Rs 256.82 crore last year. Full-year net profit was Rs 870.11 crore, up from Rs 793.38 crore. Net sales was at Rs 2182.82 crore (Rs 967.42 crore). For all of 2004-05, they were Rs 6679.36 crore against Rs 3273.96 crore in 2003-04.
JVSL is expanding its existing capacity and setting up a 1-million-tonne CR mill facility, which will be humming 24 months from now. The cost of the project, being set up to meet the growing demand from automobile and auto component makers in the south, is estimated at Rs 900 crore. This will be financed by internal accruals of Rs 400 crore and debts of Rs 500 crore.
JVSL is planning to reconstitute its board and give independent directors a larger presence, in line with Clause 49 of the listing agreement laid down by Sebi. Savitri Devi Jindal was named additional director and chairperson today.