Essar Steel to raise fresh capital to fund capex, pare debt

As it tries to brace itself against the major headwinds faced by the sector, Ruias-promoted Essar Steel today said it is looking for buyers to raise fresh capital to fund capital expenditure and pare some of the debt.
This is in addition to the earlier announced plan for raising around Rs 12,000 crore during the ongoing fiscal.
The Mumbai-based company has roped in ICICI Securities and SBI Capital Markets as advisors to help it identify investors, Essar Steel said in a statement.
The firm, however, did not disclose the amount it plans to raise.
"This decision is in addition to the previously announced plans to monetise certain non-core assets to raise equity and infuse additional funds for ramping up operations to full capacity," it added.

For the 2014-15 fiscal, Essar Steel said its holding company infused an equity of about Rs 1,300 crore and monetisation of the Odisha slurry pipeline and oxygen plant for Rs 4,850 crore.

Besides, it has also proposed to monetise the Vizag slurry pipeline and coke oven for around Rs 7,000 crore in the current fiscal. These measures will provide the company about Rs 12,000 crore, which will be utilised to strengthen the balance sheet and meet all its financial needs.
On the reasons behind the move to hunt for investors, it said: "Global steel industry is facing major headwinds due to falling steel prices and increased exports from China."

The effects of these are already seen in North America, Canada and Europe. Major steel companies across the world are taking steps to cut costs and raise money. India is no different and it is important that measures are taken now to maintain the long term health of the steel industry, it added.
"It is in this context that Essar Steel has taken a proactive decision to induct strategic/financial investors into the company," the firm said.
According to a banker aware of the development the firm will also utilise the funds to pare some of its debt.
The company has a term debt of around Rs 30,500 crore as on date.

Essar Steel India has an annual Pellet making capacity of 20 MTPA (million tonnes per annum) and steel making capability of 10 MTPA.