Bhushan Power gets lifeline, debt recast under 5/25 scheme

Bhushan Power & Steel (BPSL) will find it easier to service its loans now that bankers have approved a refinancing of its debt. A 15-member consortium has agreed to rework the repayment schedule under the 5/25 scheme, three bankers familiar with the discussions told FE. FE had reported in April that the Kolkata-based company was provided additional loans of around R5,000 crore.

Bankers have an exposure of about R35,200 crore to the company, excluding external commercial borrowings of $775 million. State Bank of India (SBI), the lead banker, has provided additional term loans, meant for the implementation of Phase VI of BPSL’s integrated steel and power plant in Odisha. BPSL commissioned the 3.5 mtpa plant in 2005.

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The company reported gross revenues of R11,288.7 crore for 2013-14, a rise of 18.6%, while net profit rose at a slower 11.1% to R635.5 crore after it paid out R1,438 crore as interest costs, higher by 33%.

BPSL’s debt-to-equity ratio stood at 2.90 on March 31, 2014. With steel prices coming off by about 20% in the last six to eight months in the domestic market, the firm’s revenues in FY15, analysts believe, could be under pressure.

BPSL said in its FY14 annual report it had plans to set up a 900 MW captive power plant and a 3 mtpa steel plant in Jharkhand. While the initial outlay was envisaged at R10,500 crore, the number would need to be revisited, it noted. The company also put on hold plans for an integrated power and steel plant in Chhattisgarh, saying “(it) will be reviewed after the commissioning of the facilities under Phase VI at Odisha”.

A total of 31 banks, including one foreign bank, have an exposure to BPSL, with Punjab National Bank the lead banker for the working capital consortium. The privately-held company is managed by Sanjay Singal — elder son of Bhushan Steel’s founder Brij Bhushan Singal. Sanjay’s brother Neeraj Singal is the promoter of the troubled Bhushan Steel.

Incidentally, Bhushan Steel is also seeking to refinance its debt using the 5/25 route; the steelmaker owes lenders R38,529 crore.

While the joint lenders’ forum (JLF) has okayed the refinancing, the boards of the respective lenders have yet to approve it. Bankers told FE the account was classified SMA-2 or special mention account in late August 2014 following a delay in repayment 60 days beyond the due date. The delay had triggered the formation of a JLF.

Imports of steel into India rose by about 70% last year to around 9.3 million tonnes, an all-time high, following a drop in prices globally. The fall resulted from the relative appreciation of the rupee against the yuan, the yen and the rouble. Local steelmakers are pushing for higher import duties as their sales are under pressure. While global prices of iron ore have dropped by nearly 50% over the past year, they haven’t fallen as much in the local market.

 

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