Tata Steel's acquisition of a heavily indebted Bhushan Steel (BSL) mill has changed the fortunes of the beleaguered facility and helped it prepay a Rs 3,000 crore loan.

The development comes after the plant witnessed a significant improvement in its financial and physical performance in the last ten months under Tata Steel management, sources said.

Bamnipal Steel Ltd (BNPL), a wholly owned subsidiary of Tata Steel, had acquired BSL in May 2018 at a cost of Rs 35,200 crore under the bankruptcy code.

To finance the acquisition, Tata Steel, through BNPL, had insured a Rs 16,500 crore loan in addition to extending another Rs 18,500 crore of an inter-corporate loan totalling Rs 35,000 crore, of which the company has now pre-paid Rs 3,000 crore, sources added.

Besides, Tata Steel BSL, the new name of the acquired entity, has refinanced a short-term acquisition financing with around Rs 15,500 crore of long term loans. The move has improved the risk profile of the company and set in place the long-term balance sheet of the entity.

This Rs 15,500 crore is a part of the refinancing of the bridge loan. The remainder of the Rs 35,000 crore is now being converted to preference shares for which shareholders' approval was obtained this week.

The credit rating of the unit has been upgraded to AA for the long-term and A1+ for short term by CARE rating, which is expected to reduce the financial cost, leading to better capital creditworthiness.

Among other signs of financial improvement, the earnings before interest, tax, depreciation and amortization (EBITDA) of the company increased from Rs 1,442 crore in nine months of FY18 to Rs 3,013 crore in the same period this year while the EBITDA margin has gone up by 8% year to date (YTD) of FY19 compared to the corresponding period last year.

The turnover of the company has jumped to Rs 15,374 crore in the first nine months of the current fiscal from Rs 12,908 crore in the previous year, an improvement of 19%.

Tata Steel BSL is currently focussed on attaining full capacity through decoupling and debottlenecking of existing facilities. The estimated time for the ramp-up is expected to be 24 months. “We are also focussing on improving maintenance and safety practices at the plants, which will help in ramping up of volumes”, said a senior company official.

With hot metal production at 3.1 million tonnes in the first nine months of FY19, the company is on its way to cross 4 million tonnes hot metal output for the first time since its inception this year. Similarly, crude steel (3.1 million tonnes) and hot rolled coil (2.9 million tonnes), have shown a 14 per cent and 16 per cent rise in production, respectively, in the same period this fiscal.

“We have adopted three-tier integration plans i.e. Excellence, Elevate and Expand. In Phase 1, we are working towards the stabilisation of the plant, debottlenecking of existing facilities, raising them to the best-demonstrated performance level and realising synergies. In phase 2, we plan to achieve benchmark performance in all areas to achieve rated capacity and generate strong cash flows. In the third phase, we plan to initiate strategic capital investments to ensure sustainable returns for stakeholders," added the company official.