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AHMEDABAD, March 20

THE Essar group Chairman, Mr Sashi Ruia, has called upon the shareholders of Essar Steel Ltd (ESL) to be "a little more patient" as returns in the steel business needed to be viewed in the long-term perspective.

Addressing the shareholders during the 26th AGM of ESL, Mr Ruia said the company was in a business where the product had a demand potential that would last through the century.

"Steel will be in demand during the lifetime of your children, their children and their children's children. A steel plant has a long life cycle. Consequently, the returns in this business must be viewed in a long-term perspective as opposed to the short term. As shareholders, we will all need to be a bit more patient," he said.

Essar Steel was well on its way to making a comeback as it had refused to buckle down during the global steel industry slump that saw as many as 26 US steel manufacturers down their shutters, he said. Though ESL had survived the industry downturn and the debilitating interest cost of borrowings, this had led to cumulative losses and the eventual erosion of the company's net worth, he added.

However, the debt restructuring scheme, which was yet to be enforced, would ease the company's cash flows and allow the Indian lenders to convert 40 per cent of their loans into foreign currency loans at 8 per cent interest even as the remaining loan portion would carry a reduced interest of 14 per cent. Also, the steel prices had firmed up from Rs 11,500 per tonne in April 2001 to Rs 18,500 per tonne in February 2003, he pointed out.

"ESL is exploring strategic alliances in the downstream sector for cold rolling, galvanising, pipes and other value-added end-use products as also in upstream raw materials such as pig iron. The alliance partners will make the investments while we will offer infrastructure facilities, provide quality raw materials to downstream producers and buy the products of upstream producers," Mr Ruia said.

The company had already indicated that it was on the turnaround track, with a significant growth in its operating profit during the first quarter (October-December) of the current fiscal at Rs 204 crore which was a 283 per cent rise over the corresponding period's figure in the previous year, he said. The income during the period at Rs 842 crore also reflected 80 per cent growth, he added.

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