Essar Steel has raised $1 billion (about ₹6,100 crore) through long-term export securitisation to pre-pay existing rupee debt. This is pursuant to Essar Steel’s strategy to have a major portion of its debt in dollar. The company had earlier raised $1 billion through External Commercial Borrowing route.
The move will help Essar Steel to de-risk its balance sheet as much of its revenues are dollar denominated, and hence, provide a natural hedge.
With the recent financing, the company has converted about ₹12,200 crore of its rupee debt into dollar. The new financing mode has saved about ₹720 crore in interest cost annually and extended average maturity of debt from 3.5 to 6.75 years, said the company.
Essar Steel has debt of about $4.7 billion (₹28,670 crore) of which 42 per cent is in dollar and rest in rupee. It intends to covert the debt proportion equally in rupee and dollar denomination.
Mahadev Iyer, CFO and Director (Finance), said in a statement that bringing interest cost down and extending repayment of debt is a critical component of this strategy to enhance competitiveness.
Essar Steel has invested ₹37,000 crore to set up a 10-million-tonne steel plant in Hazira, Gujarat. The completion of pellet plant in Odisha has made Essar Steel one of the low cost integrated steel facilities in the country.