The Ruia-promoted Essar Steel plans to raise $2 billion through pre-export finance ? which involves raising funds against confirmed orders ? in order to refinance part of its existing debt, the company said on Thursday.
Post the financing, the company would have refinanced $3 billion of its debt through foreign currency borrowings, bringing down the average cost of debt to 8.5%, resulting in an interest saving of approximately R1,300-1,500 crores annually. The company had in June raised $1 billion through external commercial borrowings (ECB) to repay part of its rupee- denominated debt.
?We will save at least 4%-5% in interest rates in value terms,? said Ashutosh Agarwala, CFO and director (finance), Essar Steel India. He added that the firm currently has a debt of around $4 billion.
?The company has received all the necessary approvals for this.We are currently in talks with guarantee and funding banks.? said Agarwala. The company did not reveal the banks and financial institutions which it plans to raise the money from.
The plan to raise $2 billion in pre-export finance is in continuation of Essar Steel?s strategy to dollarize the balance sheet, said a release from the company. ?The move to raise $2 billion will help de-risk the company?s balance sheet as the revenues of Essar Steel are dollar-linked and hence provides as a natural hedge for dollar debt,? it said. The average maturity of debt will also increase from 3.5 to 6.5 years.
Essar Steel has invested R37,000 crores for the setting up of a 10-mt steel plant in Hazira, Gujarat. The company said that after its entire Odisha Pellet Complex is commissioned fully, which is expected very soon, it would be one of the lowest cost integrated steel facilities in the country.
