Riding high on upswing in the steel sector, Essar Steel has repaid entire Rs 927 crore (Rs 9.27 billion) debt of Unit Trust of India.
About Rs 700 crore (Rs 7 billion) were paid out of internal accruals and the balance through refinancing.
Essar Steel officials confirmed the repayment but declined to give details.
According to sources, the last tranche of Rs 487 crore (Rs 4.87 billion) of UTI's loans was paid recently by the company making it the full repayment of its debt.
The company is believed to have raised funds from state-owned banks, including State Bank of India, to refinance the expensive loans.
Essar Steel, a flagship of Ruia's Essar Group, has been working on reducing its finance cost for some time now. The average cost of funds of Essar Steel under the Corporate Debt Restructuring program was 11.6 per cent and it had planned to be out of CDR net by March 2006.
"It has already repaid or refinanced a large part of its CDR debt and the finance cost is expected to have come down to between 8.5 and 9 per cent," sources in the know said.
Essar Steel had entered into an agreement with UTI in 2004 for restructuring and repayment of entire debt of Rs 927 crore (Rs 9.27 billion) by December 2005 but it was delayed by three months, sources said.
On the operational front, Essar steel went through a rigorous program to improve efficiency and productivity. It included acquisition of Hy Grade Pellets limited which operates four million tonne plant at Vishkhapatnam and 1.2 million tonne cold rolling complex at Hazira.
Asked about the company's other loans and their repayment schedules, company officials refused to comment.
Elaborating on the operations front, Essar officials said with the acquisitions of Hy Grade Pellets plant and cold rolling complex, Essar Steel has become a fully integrated steel plant.
The notable point, they said, of these acquisitions was that it was financed out of equity and not through debt.
Besides, the company has embarked on a expansion programme of steel making capacity from 2.4 million tonne to 4.6 million tonne at a cost of about Rs 2000 crore (Rs 20 billion).
The expansion plan is expected to be completed in the current financial year.
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