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Ispat to start Rs 6.5k-cr debt repayment from April 2010

22 Dec 2009 Evaluate

Mittal brothers-promoted Ispat Industries which has been in trouble following the downturn in the steel industry, will finally start repaying its huge debt of about Rs 6,500 crore from April 2010. The company will pay approximately Rs 750-800 crore every year according to the scheduled agreed to with its lenders, according to Anil Surekha, director-finance of the company.

The company has a net debt of about Rs 6,500 crore as on September 2009 and the average cost is 10%. Cash flows will be adequate enough to service the interest and repay loans.

The company lacks captive mines producing iron ore and coal that increases its cost of production. Ispat Industries had spent half of its revenues to buy raw materials in 2008-09 from the total sales of Rs 9,063 crore. However, it has now chalked out expansion in power, coke oven, pellet plant and iron ore mines that will lead to savings of more than Rs 1,000 crore per year for the company. With all this expansion put together, its savings will be Rs 1,000 crore plus by 2010-11. Moreover, we expect its ebidta (earnings before interest tax and depreciation ) to increase to 35% by 2010-11 from 17% at present.

With huge borrowings it could take almost 4-5 years for Ispat to turn around. The company posted a net loss of Rs 79.14 crore as on September 2009 along with a dip in its income to Rs 3,223 crore from Rs 2,047 crore in September 2008. Ispat is a producer of flat products producing about 3.3 mtpa of hot rolled coil at its Dolvi plant in Maharashtra.

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