Better market conditions, higher output help SAIL pare debt from peak level

Company says net debt down 15% from a peak of Rs 52,290 cr as on April 30, 2020, to Rs 44,308 cr on Dec 31, 2020

Public sector major Steel Authority of India Ltd (SAIL) has managed to reduce its net debt from peak levels over the past eight months.

SAIL said on Friday that it had reduced net debt from a peak of Rs 52,290 crore as on April 30, 2020, to Rs 44,308 crore on Dec 31, 2020, a reduction of Rs 7,982 crore. The company continues its efforts to deleverage further, it said. 

In April, SAIL had raised alarm bells over its financial position in a letter to plant and unit heads. With the nationwide lockdown to contain the Covid-19 pandemic, inventory levels at that time had crossed two million tonnes and another 0.8 million tonne was in the process while borrowings had crossed Rs 52,000 crore.

With user industries, the lockdown had hit the steel sector hard. However, the industry quickly recovered post-unlocking. 

Domestic demand picked up and international prices also surged. In tandem, prices in the domestic market moved up by 48 per cent (year-on-year) as on January 1, 2021. 

But it’s not just an improvement in market conditions that helped SAIL reduce debt. A number of factors including higher production, cost control measures and revenue maximisation by monetising idle assets boosted deleveraging efforts. 

SAIL said today that it had achieved its best ever quarterly production of hot metal, crude steel and saleable steel during the quarter ended December 31, 2020. 

Crude steel production in Q3 FY21 stood at 4.37 million tonnes, an increase of nine per cent over the corresponding period of last year while hot metal production was at 4.80 million tonnes, an increase of 12 per cent, year-on-year. 

Total sales (including domestic and exports) grew by 5.6 per cent to 4.32 million tonnes during Q3 FY21. Home sales during Q3 stood at 4.05 million tonnes compared to 3.73 million tonnes in Q3FY20. 

Additionally, SAIL also sold approximately 2.16 million tonnes of fresh fines through auction during the current financial year from its various mines. Around 0.3 million tonne of dump fines and tailings were also successfully auctioned during the period. 

This helped alleviate to some extent the shortage of iron ore in the market, SAIL said. Incidentally, a number of mines auctioned in Odisha earlier in the year had not come into operation which had reduced availability of the ore in the market.

The sale of fines by SAIL was in compliance of a notification by the ministry of mines which allowed it to sell 25 per cent of its total iron ore production calculated on the basis of cumulative production of all captive mines in a state, as well as sub-grade minerals lying at the mine pit heads. 

Road to recovery

. Net debt reduced from a peak of Rs 52,290 crore as on April 30, 2020, to Rs 44308 crore on Dec 31, 2020

. Crude steel production in Q3 FY21 stood at 4.37 million tonnes, an increase of nine per cent 

. Total sales (including domestic and exports) grew by 5.6 per cent to 4.32 million tonnes during Q3 FY21.