JSPL sells oxygen plant assets to SREI equipment finance
ET Bureau|
Updated: Oct 09, 2017, 11.42 PM IST
KOLKATA | MUMBAI: Jindal Steel and Power Limited (JSPL), Naveen Jindal’s flagship company, which is saddled with Rs 46,000 crore of debt, has entered into a deal with SREI Equipment Finance Limited for the sale and leaseback of its oxygen plant assets at its integrated steel plants at Raigarh (Chhattisgarh) and Angul (Odisha) for Rs 1,121crore.
Under the sale and leaseback agreement, JSPL will continue to operate the assets for manufacturing steel at the respective plants. The move is in line with the company’s effort to become asset-light and pare its debt burden.
“The divestment of the oxygen plant assets is a significant development to make JSPL an asset-light company, to enhance the inherent cost efficiencies,” Naushad A Ansari, CEO, Steel Business, JSPL, said. “JSPL will continue to manage these oxygen plant capacities for its 9.6 million tonne per annum (mtpa) domestic steel plants under a lease back agreement, thereby retaining full operational control,” he added.
JSPL commissioned a 4 mtpa blast furnace in Q2 FY 2017-18, among the country’s largest such facilities, to mark the completion of its 6 mtpa integrated steel plant at Angul (Odisha).
The commissioning of the Basic Oxygen Furnace (BOF) at Angul during the current quarter (October-December 2017) is expected to strengthen the company’s cash flow, JSPL said in a statement on Monday.
JSPL said under its Asset Sweating Roadmap, the company has successfully continued to sequentially enhance the capacity utilisation levels of its steel and power assets. JSPL shares was up 3.64% to close at Rs 157.95 on the BSE on Monday.
Metal sector analysts tracking the stock felt the deal involving the company’s oxygen plant assets would help in getting short term liquidity.
“For JSPL, the sale and leaseback of its oxygen asset is more like a financial arrangement for them which will help them get some short-term liquidity. It will also help bring down their high cost of financing, which is around 10-12%. SREI, on the other hand, will get some asset surety with this arrangement,” said a metal analyst who did not wish to be named.
The analyst pointed out that the next six months is critical for the company.
Under the sale and leaseback agreement, JSPL will continue to operate the assets for manufacturing steel at the respective plants. The move is in line with the company’s effort to become asset-light and pare its debt burden.
“The divestment of the oxygen plant assets is a significant development to make JSPL an asset-light company, to enhance the inherent cost efficiencies,” Naushad A Ansari, CEO, Steel Business, JSPL, said. “JSPL will continue to manage these oxygen plant capacities for its 9.6 million tonne per annum (mtpa) domestic steel plants under a lease back agreement, thereby retaining full operational control,” he added.
JSPL commissioned a 4 mtpa blast furnace in Q2 FY 2017-18, among the country’s largest such facilities, to mark the completion of its 6 mtpa integrated steel plant at Angul (Odisha).
The commissioning of the Basic Oxygen Furnace (BOF) at Angul during the current quarter (October-December 2017) is expected to strengthen the company’s cash flow, JSPL said in a statement on Monday.
JSPL said under its Asset Sweating Roadmap, the company has successfully continued to sequentially enhance the capacity utilisation levels of its steel and power assets. JSPL shares was up 3.64% to close at Rs 157.95 on the BSE on Monday.
Metal sector analysts tracking the stock felt the deal involving the company’s oxygen plant assets would help in getting short term liquidity.
“For JSPL, the sale and leaseback of its oxygen asset is more like a financial arrangement for them which will help them get some short-term liquidity. It will also help bring down their high cost of financing, which is around 10-12%. SREI, on the other hand, will get some asset surety with this arrangement,” said a metal analyst who did not wish to be named.
The analyst pointed out that the next six months is critical for the company.
