Lenders let Ispat defer repayment of Rs 586 cr

The creditors of Ispat Industries have agreed to a relaxed payment schedule, after the company expressed its inability to adhere to the corporate debt restructuring (CDR) scheme sanctioned by the financial institutions in 2001. The country’s fourth-largest steel company has been allowed to defer payment of Rs 586 crore to its lenders — IDBI Bank, IFCI, ICICI Bank and UTI — for 18-month beginning October 2008. The company was supposed to pay this amount to its lenders between October 2008 and March 2010, but will only start paying from April 2010. This will have no impact on the company’s profit and loss accounts, but will strengthen its cash flow significantly. Anil Sureka, executive director (finance), confirmed the changes to the CDR loan agreement and said that other terms and conditions of the loan, amounting to around Rs 6,400 crore, remains unchanged. He also said that the average rate of interest for the CDR loan is around 10-11%. Ispat Industries had mortgaged its fixed assets with its lenders when the CDR scheme was sanctioned in 2001, after a severe slowdown in the commodities market affected the debt servicing ability of almost all domestic steel makers. Pramod and Vinod Mittal — promoters of Ispat — had pledged a large chunk of their stake, amounting to 30% of the company’s equity, as additional collateral with lenders. They control a 41% stake in Ispat. Ispat suffered a net loss of Rs 652 crore in the December quarter, against Rs 36 crore a year ago. The board adopted and approved the quarterly financial results on January 30, after a meeting on January 28 ended inconclusively. Two persons close to the development said that the January 28 meeting could not approve the quarterly accounts, as non-executive directors asked for more clarifications on the company’s loss of Rs 441 crore, which were attributed to exceptional items. Mr Sureka, however, strongly denied this. He said that the January 28 meeting was postponed soon after it began as a director fell sick. He said there was no disagreement between the executive and non-executive directors of the company on exceptional items. This included an inventory loss of Rs 360 crore due to erosion in value of raw materials and forex loss of Rs 60 crore. The company’s accumulated loss stands at around Rs 1,000 crore, while its net worth is pegged at Rs 2,800 crore, he said. According to Mr Sureka, the company’s performance will improve in April, once it restarts blast furnace which has been shut since October for upgradation and modernisation. The closure of the blast furnace has resulted in non-availability of hot metal. Consequently, production of hot rolled coils during the December quarter came down to 2.76 lakh tonne, representing only 37% of capacity utilisation of the plant. Meanwhile, Manu Chadha, a director of Ispat, has resigned from the Board on January 29. A person close to Ispat said Mr Chadha’s CA firm is working for SAIL and therefore, he chose to resign from the Ispat Board to avoid conflict of interest. However, this could not be verified with Mr Chadha. When contacted, his office said Mr Chadha was abroad.