Essar Steel has raised $ 1 billion through long-term export securitisation to pre-pay existing rupee debt.
“ This is pursuant to Essar Steel’s strategy to dollarise its Balance Sheet. The company had earlier raised $ one billion through External Commercial Borrowing (ECB) route,” the company states.
This move helps Essar Steel to de-risk its Balance Sheet as its revenues are dollar linked or dollar denominated and hence provides a natural hedge for dollar denominated debt.With this financing, the company has dollarised $ 2 billion of its debt which has led to significant benefits. These include reduction in the average interest cost from rupee linked rate to dollar linked rate which has resulted in a large interest saving of approximately Rs 720 crores annually, and elongation of the average maturity of its debt from 3.5 to 6.75 years.
Commenting on this development, Mahadev Iyer, CFO & Director (Finance), Essar Steel India 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 to our excellent track record in exports and excellent export potential.”
Essar Steel has invested Rs 37,000 crores for setting up of a 10 million steel plant in Hazira, Gujarat.