Oommen said, “The focus today is to reduce the interest costs for which we are actively looking at dollarising all our debt.”
The company has a total debt on its books of close to Rs 22,000 crore. Out of this, in the last fiscal, the company got the permission from the Reserve Bank of India (RBI) raise external commercial borrowings (ECB) worth $430 million (Rs 2,400 crore).
The company has an aggressive plan to convert the rest of Rs 20,000 crore debt in dollars by September.
Oommen said, “This will have a tremendous impact on our profitability. Our current interest cost from 12.25-13% which will come down to 6-7%. Its a big game-changer.”
In FY12, the interest costs for Essar Steel were Rs 2,235 crore and the company posted a loss. Oommen said that with the completion of the 10 million tonne expansion, the company has achieved a critical mass and the profitability is showing a big improvement.
He said, “We have put up our own transmission lines which will save us Rs 50 crore per month. These lines are ready and will be put in service this week. Then it is our intention to put Orissa pellet plant in full production through our slurry pipeline by July this year.”
The first phase (6 million tonne) of the pellet plant in Orissa is already commissioned.
He said, “This will give us a tremendous boost on profitability point of view as this will have an impact of Rs 2000 per tonne on our finished steel.”
Last year, Essar Steel produce 4.3 million tonne steel out of the total installed capacity of 10 million tonne. Now, with the commissioning of the pellet plant later this year, Essar hopes to ramp up its production by 30-40% from the current levels.