Birla Corp strategy
Calcutta: Birla Corporation, the MP Birla group flagship, plans to trim its interest liability through debt refinancing.
While acquiring the cement units of Reliance Cement in August 2016 at an enterprise value of Rs 4,800 crore, Birla Corp had inherited a debt of around Rs 2,150 crore.
The acquisition helped Birla Corp to increase its total capacity to 15.5 million tonnes per annum from 10 million tonnes.
However, because of the additional debt burden, the consolidated finance cost of the cement firm had gone up from Rs 276.78 crore as on March 31, 2017 to Rs 377.63 crore as on March 31, 2018.
During the quarter ended December 31, 2017, the company had opted for refinancing of loans to the tune of Rs 1,700 crore, bringing down the interest rate from 10.25 per cent to 8.90 per cent. The company envisages a benefit of Rs 25 crore from the debt restructuring.
According to chief financial officer Aditya Saraogi, the impact of the additional debt was only for seven months (September to March) during 2016-17. But in 2017-18 the impact, in the form of additional debt service cost, was more prominent.
"We have refinanced most of the loan. We will see the beneficial effect this year," Saraogi told shareholders in response to queries raised at the company's annual general meeting on Friday.
According to chairman Harsh V. Lodha, despite the cost and increased borrowing, the company has been able to consolidate its presence in central India.
"With this acquisition the company has strengthened its cement business," Lodha said adding that logistics and fuel costs remain key concerns.