Mumbai, Jan. 13: Jindal Steel and Power Limited (JSPL), part of the O.P. Jindal group of companies, has embarked on a financial restructuring exercise. The process entails conversion of existing rupee debt into foreign currency loans, seeking lower rates of interest from banks and pre-payment in some cases to bring down the huge debt levels.
The company is also in talks with financial institutions like the Unit Trust of India (UTI), Life Insurance Corporation (LIC) and General Insurance Corporation (GIC) to bring down interest rates on debentures by around 40 per cent. JSPL has already pre-paid more than Rs 60 crore of preference shares as part of this effort.
Speaking to The Telegraph, vice-president Sushil Maroo said the company has already brought down its cost of debt to around 12.5 per cent. This is expected to further go down to 9 per cent over the next few months.
“We are following three strategies. Since the company’s performance has improved, we are now seeking better interest rates from the financial institutions, converting existing rupee loan into foreign currency debt. In some cases, pre-payment is also being looked at,” he added.
On the foreign currency front, the company has so far raised close to $ 15 million at fine rates of Libor plus 100 basis points. JSPL is now planning to raise an additional $ 5 million.
While JSPL’s total debt is put at Rs 850 crore, these initiatives will bring about a vast improvement in its bottomline. “Even if we are in a position to bring down interest rates by 3 per cent on Rs 500 crore of debt, the bottomline will be boosted,” Maroo said.
JSPL occupies a leadership position in coal-based sponge iron, prices of which are ruling at an all-time high of Rs 6,500 per tonne. The company is now implementing an ambitious rail and universal beam mill project.
Senior JSPL officials pointed out that in view of the stress laid by the ministry of railways on development of railway infrastructure over the next few years, the project should yield good returns. “The government is planning over Rs 70,000 crore fund towards safety. The company expects the demand for rails to go up to 8 lakh tonnes from the present 4 lakh tonnes,” they added.
JSPL was formed in April 1998 as a result of a vertical split of Jindal Strips and it now has facilities for production of sponge iron, power, mild steel ingots and ferro chrome. In sponge iron, the company has an installed capacity of 6.50 lakh tonnes. The company, which generates 150 mw of power, is now involved in a 55 mw power project at a total investment of Rs 200 crore.