Essar Steel raises $1 bn to dollarise balance sheet

Ruias-promoted Essar Steel on Monday said it has raised $1 billion long-term debt, a move that will help the steel maker to dollarise its balance sheet and extend average maturity of its debt by over three years.

The company has raised $1 billion through the long-term export securitisation, after an external commercial borrowings (ECB) of the same amount in June last year.

"This is pursuant to Essar Steel's strategy to dollarise its balance sheet... This move helps the company to de-risk balance sheet as its revenues are dollar-linked and hence provides a natural hedge for dollar denominated debt," Essar Steel said in a statement.

The $2 billion dollarising of the rupee debt has led to significant benefits, including a reduction in the average interest cost of around Rs 720 crore annually and elongation of average maturity of its debt from 3.5 to 6.75 years, the company said.

Essar Steel, which has a total of 14 million tonne per annum (mtpa) installed steel-making capacity in India and overseas, generates a good part of revenue through exports.

Essar Steel India CFO and Finance Director Mahadev Iyer said: "Bringing down interest cost and elongating maturity of our debt is a critical component of our strategy to enhance our competitiveness. We are uniquely positioned to securititse exports owing."

The company has a long term debt of about Rs 29,000 crore, of which 58 per cent is rupee-denominated debt and the rest has been dollarised.

Essar Steel has invested Rs 37,000 crores for setting up of a 10 million tonnes per annum steel plant at Hazira in Gujarat.