NEW DELHI, February 5: State owned Steel Authority of India (SAIL) will soon approach the central government for enhancing its capital base to offset a high debt-equity ratio, Sail chariman A R Pande said on Thursday. The ratio would be brought down either through conversion of loans from steel development fund (SDF) or accrual of capital by hiving off subsidiary activities like capital power plants or oxygen units."Investment targets could be scaled down to Rs 10,000- 12,000 crore," Pande said, adding that, "we have an unfavourable debt equity ratio. We will have to increase our equity as an excessive reliance on borrowings could prove costly."The navratna public sector undertaking is currently engaged in working out a financial restructuring package to ensure best returns on the capital employed by minimising its cost of finance.
Declining to give details of his options, Pande said market conditions were not conducive for fresh issue to expand equity base, which bloated 3.5 per cent through a globaldepository receipt (GDR) issue of Rs 144 crore in 1996.
The Rs 14,000 crore public sector steel giant has a debt-equity ratio of over 2.3:1. Pande said Sail's loans from SDF (about Rs 5,000 crore) could be considered for conversion into equity.
"Anyway, it is our money in SDF (a fund collected through cess on steel produced by major steel manufacturers). We believe it should come back to us," he said. Sail's contribution to the SDF fund of about Rs 6,000 crore is around 80 per cent and the cess has been withdrawn since 1996.
Pande disclosed that a sum of Rs 12,000 crore since 1986 for modernisation of Sail's integrated steel plants at Rourkela, Durgapur (already completed) and Bokaro (nearing completion) had to be borrowed, entailing high costs.
For the ninth five year plan period, Sail required investible funds for modernising Bhilai at a cost of Rs 5,000 crore and upgradation of other mills and technology upgradation for quality improvement.
Currently, Sail's total borrowings stand at about Rs17,500 crore, leading to a heavy outgo in terms of interests and the spate of modernisation has also zoomed the bill on depreciation account.
Copyright © 1998 Indian Express Newspapers (Bombay) Ltd.
