The company attributed the huge loss figure to a steady decline in realisations. The company said realisation drop coupled with change in the product and market mix had an adverse impact on the total sales turnover to the tune of Rs 260 crore. At the same time, there was also a significant rise in input costs.

Other income was substantially higher at Rs 189.21 crore against Rs 132.98 crore in the previous fiscal, while interest charges were down to Rs 502 crore from Rs 530.99 crore.

The company said production of hot-rolled coils at 1.58 million tonnes was 3 per cent higher than 1.53 million tonne in 1997-98. Sales, on the otherhand, was one per cent lower at 1.479 million tonnes.

Exports, though around 23 per cent higher at 4.41 lakh tonnes, would have had a negative impact on the bottomline as international prices were at least 20 per cent lower than domestic prices throughout the year.

The company has said Essar Steel debt profile is not in consonance with international norms in terms of its maturity profile. Measures are being taken to increase the maturity profile which could go towards mitigating operating cash-flow mismatches. Chairman Shashi Ruia said steps like divestments in its power business, which is to fetch the company around Rs 500 crore, spin-off of its pellet plant to a separate subsidiary, cost reduction and fresh equity infusion could go towards addressing the issue of shareholder return.

INSIGHT
Essar Power stake may help firm

With higher losses in each quarter, one thing that may be in the mind of shareholders and other stake holders would be whether the company may land up being apotential sick company.

In the current year, the cumalative losses of the four quarters put togther has resulted in reduction of net worth by 23 per cent. Further, net losses in the fourth quarter was the highest at around Rs 270 crore. The first quarter of the current year has seen a fall in realisations by Rs 600 to Rs 1000 per tonne, depending on the grade and size of flat products manufactured by the company.

The company may benefit substantially through the money received from proposed sale of stake in Essar Power as it would be required for redemption of Rs 1000 odd crore worth unsecured FRNs held by the company. Hence the interest charge may change marginally but with such low realisations prevaling in the steel market, it would be miracle if the company comes out of red in this fiscal.