Industrial Development Bank of India and State Bank of India have sanctioned a Rs 400 crore (Rs 4 billion) loan to Jindal Vijayanagar Steel Ltd.
JVSL, which has embarked on a Rs 1,700 crore (Rs 17 billion) refinancing programme, is one of the top five largest steel companies in India with a capacity of 2.4 million tonne.
The funds will go towards refinancing the company's high-cost debt from its corporate debt restructuring lenders.
Capitalising on the lower interest rates prevailing in the system and the upturn in the steel sector, the company plans to refinance its high-cost debt by this fiscal end. JVSL is the merged entity of the steel businesses of JVSL and JISCO.
Apart from the refinancing, JVSL is readying to prepay Rs 200 crore (Rs 2 billion) out of its total debt of Rs 4,200 crore (Rs 42 billion) over the next week before the end of fiscal year 2004-05.
This tranche of prepayment, which will take the total prepayment during the year to Rs 500 crore (Rs 5 billion), is being done through its internal cash accruals. It will reduce JVSL's outstanding debt to Rs 3,700 crore (Rs 37 billion).
"The company will save three-four per cent interest cost by refinancing the old debt. The new loans, which will substitute the old ones, are being sourced at six-seven per cent against the 9-10 per cent average cost of the old debt. The company is planning to refinance Rs 1,700 crore (Rs 17 billion) which will translate into a cost-saving of Rs 50 crore (Rs 500 million) a year," said Sheshadri Rao, director-finance, JVSL.
The company had refinanced Rs 850 crore (Rs 8.5 billion) of debt in September 2004 by way of $75 million worth securitisation and a Rs 500 crore (Rs 5 billion) loan syndication.
For the remaining Rs 850 crore (Rs 8.5 billion) refinancing plan, JVSL has already tied up a Rs 400 crore loan and the remaining funding is being worked out through part securitisation and part fresh funding.
JISCO has procured a 12-month export order worth $50 million to the Swiss trading company, Duferco, the receivables of which are being securitised.
The company had in the third quarter prepaid Rs 850 crore of its high-cost debt from its internal accruals. Other large steel companies are also attempting to make use of the conducive environment and reduce the burden of their loans.
