The Rs 635 crore non-convertible debenture issue of Jindal Vijaynagar Steel Ltd has been downgraded from BB to D by the Credit Rating Information Services of India Ltd (Crisil), indicating that the instrument is in default or is expected to default on maturity.
The revision in rating to default grade assumes significance since financial institutions have recently agreed to extend additional assistance to this project to the tune of around Rs 516 crore, if the promoters meet some stipulations.
The company is setting up a 1.6 million tonne per annum steel project in Bellary, Hospet in Karnataka.
The cost of the project currently stands at around Rs 4,968 crore representing a cost overrun of around Rs 830 crore, analysts said. The plant was originally envisaged in 1994, as a 1.25 million tonne plant. A pellet unit, which was not in the original project has also been added.
The short-term scenario for the steel industry does not look bright with continuing recession and dumping of cheaper steel from Korea and CIS countries.
The JVSL project is also the first in the world to use corex technology, an offshoot of the blast furnace technology, on such a large scale, said analysts and there were risks associated with this.
JVSL has also entered into joint ventures with Tractebel and Praxair for setting up power and oxygen plants, respectively, as forward and backward integration thrusts.
The commissioning of the power plant is also being delayed since the corex gas from the steel project is to be used as the main raw material for generation of power.
JVSL is a greenfield project with a gearing of 2.18. It is to be implemented in two phases, of which the first will consist of the downstream oxygen plant.
At present, a hot-rolled coil mill using imported raw materials has started production.
