Essar Steel proposes to capitalise Rs 1,297 crore for capital work undertaken by the company during 1996-97.This figure steel analysts said was ``rather high.
The capitalisation is on account of the downstream projects that we put up during the year, a company source said. ``Capitalising is an accounting entry and the assets are capitalised only once the plants start commercial production, and depreciation can be provided for on the asset once it is capitalised, the sources said.
Downstream projects undertaken during the year include a slurry pipeline, a beneficiation plant, a SAP package, reheating furnace, and the pellet plant, which the company proposes to hive off into a separate firm, the source added.
Essar had capitalised Rs 1,456 crore in 1995-96, the year its integrated steel plant was commissioned. The companys income for 1996-97 was Rs 1841.95 crore. Expenses for the period under review had been Rs 1,983 crore, of which Rs 400.54 crore went for captive consumption. Hence expenses for the year amounted to Rs 1,582.78 crore. Essar Steel reported a gross profit of Rs 259.17 crore and a PAT of Rs 9.62 crore for 1996-97. The capital expenditure for 1996-97 includes the Rs 112.5 crore spent for site and land development, Rs 685.60 crore towards plant and machinery and Rs 302.38 crore in finance charges (net of interest and inclusive of lease rentals).
Essar proposes to capitalise another Rs 31.09 crore which was spent in raw materials, Rs 11.69 crore spent towards employee benefits, Rs 16.63 crore in fuel charges, and Rs 83.85 crore as semi-finished goods. The company also intends to capitalise another Rs 32.52 crore other expenses including insurance expenditure, and another Rs 19.02 crore for conversion charges, stores and spares consumed and repairs and maintenance costs.
The company had raised Rs 676.25 crore as working capital loans from banks as on March 31, against Rs 451.70 crore the previous year. Total secured borrowings as on March 31 was Rs 2,997.14 crore compared with Rs 2641.53 crore in 1995-96. Unsecured loans raised by the company for the year amounted to Rs 1,256.51 crore as against Rs 1,384.61 crore the previous year.
