Debt-laden Bhushan Steel is in the processing of realising Rs 3,000 crore from sale and lease-back arrangements for two of its critical assets, the oxygen and coke oven plants.
"We have sold the oxygen plant for Rs 1,000 crore and leased back, which will help reduce some liabilities. The coke oven plant is under process which could translate to another Rs 2,000 crore," Bhushan Steel director finance and chief financial officer, Nittin Johari, said.
With a colossal debt of Rs 40,000 crore, Bhushan became a spot of bother for banks. In August, bankers decided to appoint an audit firm to monitor the cash flow on a daily basis and an independent engineer to monitor the operations of the company. In total, 35 banks have a combined exposure in working-capital loans and term loans.
"Banks are monitoring operations. It's working out well," Johari said.
The sale and lease-back deals were also mooted by the lenders. Though the deal looks attractive, Bhushan would still have to pay lease rent for the assets. "These are long-term leases, 14 to 15 years," Johari explained.
On November 14, the company had informed the stock exchanges that the board had approved sale and lease-back arrangements of the coke oven plant and oxygen plant at Odisha.
It was the company's Odisha plant that landed Bhushan in trouble. First, it was the pace at which Bhushan increased capacity. In 2008-09, 0.3 million tonne was commissioned, the second phase of two million tonnes was completed in 2009-10; finally, the third phase of 5.2 million tonnes was commissioned early 2014 after a considerable delay which took a toll on the finances.
In 2013, the Odisha State Pollution Control Board directed Bhushan Steel to shut its blast furnace after an explosion during the trial run killed two workers and injured 16. The closure resulted in loss of production for about six months for the company.
However, what is helping Bhushan to get its act back together now is the fact that bankers have extended the repayment schedule under the RBI's 5:25 scheme. The scheme allows the repayment period to be stretched up to 25 years.
"Reduction of debt is not part of the 5:25 scheme, it's about aligning cash flows and liabilities. It also gives us time to ramp up capacity. Volumes have picked up by 20 per cent," Johari said.
"If volumes pick up, then Bhushan's cash flows will improve. But the entire sector is in trouble and whoever has bigger debt is in bigger problem," an analyst said.
For the September quarter, Bhushan Steel recorded a total income of Rs 3,178 crore compared to Rs 2,966.55 crore in the same period last year. The net loss, however, widened from Rs 297.19 crore to Rs 732.79 crore.
No comments:
Post a Comment