Essar Steel, Ispat Industries and Jindal Vijaynagar Steel made remarkable gains in early trades on Wednesday after financial institutions on Tuesday announced a debt recast package for the steel makers.
Essar Steel (up 9.8% to Rs 10.05), Ispat Industries (up 13.1% to Rs 6.45) and Jindal Vijaynagar Steel (up 9.8% to Rs 6.70), all soared high.
Steel scrips in general have been northward bound of late on the back of a series of price hikes effected by makers of both long and flat steel products. Low inventory levels and firmness in international steel prices have been driving the rally in steel shares as well.
Financial institutions and banks on Tuesday announced a recast of Rs 20,500 crore (Rs 205 billion) worth of loans taken by three major steel companies - Ispat Industries, Essar Steel and Jindal Vijaynagar Steel.
The lenders have evolved a package for these three hot rolled coil manufacturing companies, who will write down 40% of their existing equity by converting that into 0.01% preference shares payable after the term loans are repaid over a period of 13-15 years.
According to the package, which will be placed before their respective boards, 40% of outstanding loans would be converted into foreign currency loans at a fixed interest rate of 8% including LIBOR. The balance 60% rupee term loans will be charged at a flat 14% for the three companies. The loan will have a tenure of 15 years which includes a moratorium period of two years during which time only interest component will be serviced.
Before the package is released, each of the three companies will have to open trust and retention account with specified banks. This will enable lenders to keep a tab on the companies cash flow and all the revenues of the company will be deposited in a single account.
IDBI and ICICI Bank, that have huge exposure to the steel sector, have approved of this recast package.
JVSL, in addition, was boosted by reports that it has lowered its loss in the quarter ended 31 December 2002 and posted a cash profit, compared with a loss a year ago.