India's largest stainless steel manufacturer Jindal Stainless on Thursday said it has successfully exited from corporate debt restructuring after it paid more than Rs 800 crore to its lenders. The firm had entered the CDR framework back in 2009.
JSL said it has already re-compensated existing lenders to about Rs 275 crore in cash which will reflect in their income in the current fiscal while it has fully redeemed the outstanding Optionally Convertible Redeemable Preference Shares (OCRPS), which were issued to the lenders in June 2017 paying them around Rs 558 crore in the process. The two put together JSL has paid an aggregate Rs 833 crore to its lenders and it received a letter from the consortium of CDR lenders on Wednesday to this effect.
"The exit from CDR marks a significant step forward for JSL. This underlines the improvement in JSL's liquidity profile and profitability. The exit will not only provide financial and operational flexibility to our business but will pave the way for a new growth phase," said Abhyuday Jindal, managing director, JSL. "The CDR tenure was prolonged as sustained imports impacted our top-line growth. We are grateful to all our stakeholders, especially our lenders, for their continued faith in us."
To assist the company in the redemption of the OCRPS, the promoter group entity that largely consists of the Jindal family which controls over 68 per cent shareholding in the firm, had infused equity and subsequently JSL had last month issued Non-convertible Debentures (NCDs) worth Rs 400 crore to Kotak Special Situations Fund (KSSF). Kotak has also acquired approximately 5 per cent equity stake in JSL through the secondary market.
The company said its CDR tenure was unduly extended due to adverse market conditions in view of consistent dumping of stainless steel flat products over the past several years from China & ASEAN countries. This hurt its margins and caused undue financial stress as surplus production in these countries was being rechanneled to growing markets like India.
"Trade remedial measures like anti-dumping duty and countervailing duty imposed on imports by the government to create a level-playing field are being consistently circumvented, rendering these remedial measures ineffective. However, de-bottlenecking and internal process improvements helped JSL sustain its operations. Currently, the Company has an installed capacity of 1.1 million tonnes per annum (MTPA)," it said in a statement.
The Company has seen an improvement in the net debt-equity ratio which stood at 1.3 as on December 31, 2019, as compared to 3.2 as on March 2017.
The domestic steel industry found itself at the centre of a massive NPA build up in the aftermath of intense dumping from China between 2014/15 and 2016/17 that hit the profitability of companies. In 2015/16, gross NPAs in the sector amounted to Rs 1.15 lakh crore. The sector accounted for four of the 12 big firms - Essar Steel, Electrosteel Steels, Monnet Ispat and Bhushan Steel - pushed by the RBI for NPA clean-up under the Insolvency and Bankruptcy Code (IBC).
The exit of JSL from CDR could be seen as a bottoming out of the sector as a whole.
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"The CDR exit could have been preponed by at least 2 years provided the deluge of imports had not impacted the margins," a company spokesperson added.
In 2015, the company had undertaken an operational restructuring distributing its Rs 8,580 crore debt among four firms while cutting down its interest outgo by 3.35 per cent. This had brought down the debt of JSL to Rs 3,080 crore at that time.
Exiting the debt restructuring framework frees up options for the company to raise funds for its future expansion plans as also allow freedom to potential lenders to offer preferential terms of lending.