SAIL is virtual zero debt company

Press Release
New Delhi

Completing the year 2004-05 with an expected sales turnover in excess of Rs. 30,000 crore, Steel Authority of India Limited (SAIL) is all set to achieve the enviable status of a virtual zero debt company. This is a result of the company’s strategic business plan, which enabled it to reduce borrowings to the level of its deposits in various banks.

At the end of FY ’05, SAIL’s market borrowings stood at around Rs. 5,800 crore, whereas its short term deposits are also of similar magnitude, which implies that the company has virtually attained zero debt status. The outstanding loans couldn’t be dissolved since they have been raised for longer terms. SAIL did not acquire any fresh loan in the last two years and financed its entire VR scheme during 2004-05 from internal accruals.              

The zero-debt status will have a special significance in view of SAIL’s goal to be within a debt-equity ratio of 1:1 even while investing in the range of Rs 25,000 crore for capital schemes under its Corporate Plan 2012.  Simultaneously, riding on the crest of sustained improved performance, the company is set to achieve record profits for the year 2004-05.    

Continuing with its efforts to reduce the rate of borrowing, the company prepaid an amount of Rs 525 crore to a leading financial institution in the beginning of the last financial year on negotiated settlement basis. Substitution of higher interest bearing loans with lower cost ones, exercising call option and controlling fresh loans are some of the initiatives that helped the company to reduce its borrowing level and cost of finance. 

The improvements in the company’s financial performance are closely linked with the high level of physical performance that saw the company maintaining its average capacity utilisation at 104% and setting records in production of value added products. With record production of finished steel at 9.28 million tonnes, the public sector steel giant achieved 8% growth in its domestic sales.

Reflecting on the virtual zero-debt status of the company, Mr V.S. Jain, Chairman, SAIL, said: “We have come this far on the strength of our sustained efforts to improve internal efficiencies supported by buoyancy in market. Strengthening of the company’s financial foundation will instill greater confidence to accelerate our growth.”

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