Jindal Stainless pares down interest outgo with some FI help

Steel companies seem to be on a financial housekeeping drive. Holding their hands through this are financial institutions (FI's), which have large exposures in the companies. After Steel Authority of India (SAIL), Essar Steel and Rashtriya Ispat Nigam (RINL), the latest to join the bandwagon is OP Jindal group company Jindal Stainless (JSL).

The company, It is learnt has kickstarted a move to reduce its interest burden. Jindal Stainless, along with its lead institution ICICI and other FI's like IFCI, LIC, GIC, has pared down its interest rate to 14 percent from the earlier 20 percent. This strategy includes conversion of its dollar loans into rupee terms and refixing the debt maturity.

Total loans of the company amount to Rs. 350 crore, with about Rs. 150 crore in dollar terms and about Rs. 200 crore in rupee terms. It has been only recently sanctioned an assistance of Rs. 150 crore by ICICI.

While the interest rate has been pared down to 14 percent, of the differential amount, JSL has paid upfront with premium about Rs. 60 crore to the institutions. The company also converted its rupee loans into dollar terms, which has reduced its interest to about 15 percent.

Jindal Stainless vice-president Arvind Parakh said the restructuring drive has been initiated to reduce its high interest outgo.

The company, which is India's largest stainless steel producer, had contracted loans at 20 percent to fund its Rs. 375-crore expansion project started in 1998.

Jindal Stainless is also simultaneously trying to increase its market presence by getting into newer segments. It currently has a domestic marketshare of 40 percent.