Jindal Stainless has brought down logistics cost by around 15 per cent to help the company exit the corporate debt restructuring (CDR) framework.

The company has also tweaked raw material sourcing and its distribution value chain to become the few companies in the country to successfully achieve an exit from the CDR.

Abhyuday Jindal, Managing Director at Jindal Stainless, told BusinessLine that “All our processes and functions had to really be spruced up and improved for us to jointly get out of CDR. From operations side, the primary focus was to get our Jajpur Plant (in Odisha) fully utilised. When we started in Jajpur, we did not have our railway siding ready, this was completed in the last three years and now we have moved most of our logistics to rail. Rail is the lowest cost transportation in the country.”

“Then we went into strategic sourcing, this was an important area because the raw material for stainless steel manufacturing is not readily available in the country. Earlier, we would get maximum raw materials from the US and Europe, this led to a high lead time and volatility. Under the transition, we started developing domestic sources and procuring from South East Asian and Middle Eastern countries. That drastically reduced our lead time and working capital cycle. We also had better negotiating strength with our new sources,” he added.

Alternative sources

Jindal said the group also moved away from buying pure nickel and starting looking at alternative sources of ferroalloys.

Commenting on the steps taken to better the sales cycle, Jindal said, “On the sales and distribution side, we went in for a significant transformation. We now have close to 14 warehouses across the country, and started supplying our consumers just in time, bringing down their delivery times. This helped them bring down their working capital and inventory costs. This also helped us marginally get a better price.”

“There was also an effort to improve energy efficiency of the Jajpur plant and lower production costs. A lot of focus was on cash allocation and management. We have learnt it the hard way but now we are there. While it is difficult to give the exact number due to the different products, it is estimated that we have brought down our logistics costs by 15-20 per cent,” Jindal said.

On the steps taken to better the balance sheet, Anurag Mantri. Group Chief Financial Officer at Jindal Stainless, said, “We have focussed on drastically improving the balance sheet ratios to reduce the debt-equity. We have repaid more than ₹1,000-crore debt in the last two years to bring down the debt-equity ratio to 1.4, which used to be 3.2 in fiscal 2016-17. This put together has brought in balance sheet strength to us.”

Strategic step

In addition, the company has also offset the optionally convertible redeemable preference shares to get more confidence of shareholders and lenders. “We also took a strategic step to address the legacies of CDR that were sitting in the balance sheet of the company. One such instrument was optionally convertible redeemable preference shares. Under this instrument, the lenders right to convert debt to equity was starting from November 1, 2020 onwards. Strategically, we completed the transaction in March 2020 itself ahead of the CDR exit. We completely redeemed this convertible otherwise it would lead to 20 per cent equity dilution, if the lenders would have decided to convert it,” Mantri said.

“This gave good confidence to lenders and shareholders that how we have managed the balance sheet turnaround. To enable this, we took a new loan which is non-convertible,” he added.