The sharp fall in gas prices and minimum import price of $450 a tonne on steel imports, besides the possibility of demand looking up may help Essar Steel sail through the troubled times even as it negotiates with banks to reduce its net debt pile of ₹38,000 crore (including working capital loan).

Mahadev Iyer, Director (Finance) and Chief Financial Officer, said banks have already agreed to cover loan worth ₹14,500 crore under the 5/25 scheme which is expected to reduce the interest outgo to ₹300 crore next fiscal.

The company is in talks with banks to get the remaining loan also to be covered under the same scheme. If that happens, Iyer said the interest outgo will reduce substantially else the company has to pay ₹3,800 crore on the uncovered portion of the debt.

Essar Steel plans to raise ₹11,200 crore through sale of its coke oven plant and slurry pipelines in Odisha and Visakhapatnam and take it back on long lease from the buyer was put off after the RBI guidelines prohibited such deals.

This apart, he said, the company has appointed SBI Caps to scout for strategic investors in its steel asset to reduce debt.

In February, the Ruias-owned Essar Group sold real estate near the Bandra Kurla Complex for ₹2,400 crore to RMZ Corp. The promoters and group companies have invested ₹9,000 crore over three-and-half years in Essar Steel which had paid ₹20,000 crore as principal and interest during the same period, said Iyer. He added that the promoters are willing to invest another ₹1,500 crore.

Dilip Oommen, Managing Director, said the company has already ramped up capacity at the gas-based steel making unit to 5 lakh tonnes in March from 3.54 lakh tonnes in February. The unit was almost shut last year due to non-availability of gas. The gas price has fallen to $6 mmBtu from $15/mmBtu.

Since November, the production has doubled and is currently operating at 70 per cent capacity utilisation. This has resulted in EBIDTA margin improving to 18-20 per cent from five per cent in November last year, said Oommen.

“We believe the challenging times are behind us. Plans are also afoot to tie-up gas on long term when the next price dip happens as we had missed the bus last time around,” he said. The company is also ramping up sales through its e-Hypermart portal to improve retail market penetration and enhance rural reach to record a turnover of ₹300 crore next fiscal.

Essar Steel gets 25-30 per cent of its total sales through its 38 hyper mart outlets and 200 franchise-owned express marts.

Steel imports have come down substantially after MIP was fixed last month and China itself is shutting down unviable units to bring down annual steel production to 720 million tonnes (mt) from 850 mt with a target to reduce it further to 660 mt, said Oommen.

As Essar Steel commands a premium of ₹1,000 a tonne compared to competitor's products, he said the revival in domestic demand bodes well for the company.

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