JSL to restructure debt to fund projects, avoid defaults

JSL Ltd, the country's largest stainless steel producer, is planning to restructure its Rs 4,300-crore debt to part fund the expansion of its Orissa project and avoid a possible default on the loans undertaken.     

"Subject to the lenders approval, we will restructure our Rs 4,300-crore debt which will help us in avoiding shortfall in internal accruals earmarked for funding the second phase of Orissa expansion project and the possible default in repayment of loan," JSL Director (Strategy & Business Development) Arvind Parakh told PTI.     

The proposed corporate debt restructuring (CDR) would also help the company to ward off the threat of its debt being declared as Non-Performing Assets or bad loans by the Reserve Bank, he added.     

The company describes the 2.9:1 debt-equity ratio as "alarming but manageable" as it looks at its balance sheet after incurring second consecutive quarterly loss.     

JSL Ltd, which has to pay back about Rs 2,000-crore loan in the next two years, is looking to buy more time from the lenders by way of undertaking the "voluntary CDR programme." The move would help the firm to complete the project in the extended time frame of March 2012.     

The stainless steel major is undertaking Rs 5,600-crore capacity augmentation programme in the second phase of the Orissa expansion project to set up an 8-lakh tonne per annum (LTPA) mill to produce the alloy.

The company has already installed 250-MW power plant, 2-LTPA ferro-alloy mill along with a 4.25-LTPA coke oven unit in the first phase of the project.     

Along with its current 7-LTPA stainless steel mill in Hissar, JSL Ltd, aimed to reach an overall production capacity of 1.5 million tonnes per annum (MTPA) by March 2010, which was later revised to March 2012 on account of the slump in demand due to the economic slowdown, which hit the world in the later part of 2008.     

Waning demand for the alloy, followed by steep fall in prices and correction in raw material rates along with fluctuation in foreign exchange rate pushed the company to post loss in the third and fourth quarter as well as the whole of 2008-09 financial year, Parakh said.     

JSL Ltd yesterday reported a net loss of Rs 609.45 crore for the financial year 2008-09. The company had a net profit of Rs 266.30 crore during the year ended March 31, 2008.     

However, the company now has a positive outlook for the fiscal as it sees demand for the alloy improving.     

"Demand for the alloy is improving from across all the sectors. Some improvement in prices is also seen," he added.     

Stainless steel prices have almost halved to $1,700 a tonne at present from the highs of $3,500 per tonne in the last fiscal.