Essar Steel raises $1 bn to fund rupee debt

The move will save Rs 720 cr annually with a reduction in average interest cost

In an attempt to dollarise its balance sheet, steel major Essar Steel has raised $1 billion through long term export securitisation to pre-pay existing rupee debt.

The company had earlier raised $1 billion through external commercial borrowings (ECB) route. With this financing, the company has dollarised $2 billion of its debt which has led to significant benefits.

The move was prompted by reduction in average interest cost from the rupee linked rate to the dollar. The conversion is estimated to save an interest to the tune of Rs 720 crore annually on elongation of the average maturity period of its debt from 3.5-6.75 years.

It will help Essar Steel to de-risk its balance sheet as its revenues are dollar linked or dollar denominated and hence provides a natural hedge for dollar denominated debt.

"Bringing down interest cost and elongating maturity of our debt is a critical component of our strategy to enhance our competitiveness. We are uniquely positioned to securititse exports owing to our excellent track record in exports and excellent export potential," said Mahadev Iyer, chief financial officer and Director (Finance), Essar Steel India.

Essar Steel has invested Rs 37,000 crore for setting up of a 10 million steel plant in Hazira, Gujarat. The completion of Odisha facility has made Essar Steel one of the lowest cost integrated steel facility in the country.