Financial Daily from THE HINDU group of publications
Tuesday, Jan 22, 2002
A fired-up Singareni Collieries looks at currency swap option
V. Rishi Kumar
Mr A. Venkateshwar
HYDERABAD, Jan. 21
SINGARENI Collieries Company Ltd, which had charted out strategies to beat the mounting debt burden by adopting a fiscal re-engineering approach, has emerged triumphant from the brink of financial disaster.
The 110-year-old state-owned public sector undertaking (PSU), in which the Central and the State Governments own equity in the ratio of 49:51, is now looking at currency swap options. There is no budgetary support for the company now, which is on the verge of wiping out a whopping Rs 1,110-crore debt burden by this fiscal-end.
The company's Director of Finance, Mr A. Venkateshwar, gave Business Line an account of how the company managed to successfully push through its package of reforms in the ``do or die'' situation by mapping out its own road to recovery.
On the grim financial scenario...
In the year 1996-97, the company was saddled with huge losses of Rs 1,219 crore. The losses have been brought down to just about Rs 280 crore in the last five years. In the last two years, we have made profits of Rs 302 crore and Rs 89 crore respectively, with wage revision taking away significant amount of profit last year. This year, we are expecting to register a profit of about Rs 280-300 crore.
What were the problems?
We had to contend with a huge Rs 663-crore loan which we had inherited in the Eighth Plan period. If we had paid this amount from our income, we would not have had money for salaries and even working capital. We convinced the Central and State Governments to waive interest.
The Governments considered this issue and agreed to extend a ten-year moratorium. This was the first breather for the company. Along with this, a penal interest amount of Rs 66 crore was also waived. This was, however, on the condition that we would not seek any more budgetary support from the Government.
The challenge of high-interest loans...
We were carrying high-interest loans from the Central Government which were in the range of about 17 per cent. The debt was about Rs 1,110 crore as on 1997-98. We have wiped out the entire loan by going in for market borrowings by pledging bonds with a coupon rate of 13 per cent. This loan was procured at 11.5 per cent. This meant a direct saving of about 5 per cent on loans.
While initially we had to pay in nine years, the repayment period has now been reduced to five years. This also meant a saving of about Rs 206 crore. This novel method of raising resources has eased the pressure on debt servicing.
Looking ahead, we are eyeing the possibility of currency swap. Based on the current trend, we are contemplating the option of loans which are available at about five per cent. This means we will be able to further reduce the debt exposure. We are looking at a consortium of leading treasury management experts to assist us. This will help retire loans of about 11 per cent by inducting loans at 5 per cent.
On the financial restructure...
The Central and State Governments had infused additional equity of Rs 268 crore, besides the Rs 298 crore committed for the Ninth Plan. A ten-year interest-free moratorium on Rs 663 crore of overdue interest was extended along with rescheduling of loans of Rs 167 crore.
While there would be no further financial support from both the Governments, the company is planning total investments of Rs 2,113 crore during the Tenth Plan period, interestingly all through internal accruals.
From about 29 million tonnes in the Eighth Plan, the production capacity has been increased to about 31 m.t. This is expected to be scaled up to about 36 m.t. by the Twelfth Plan period.
On the issue of efficiency confronting Singareni...
We are among the largest companies in the country and the only coal company in the South. With about 53 per cent open-cast and 47 per cent underground mines, Singareni accounts for 6 per cent in coal reserves and 10 per cent of country's coal output. Unlike coal firms in the northern belt, the cost of excavation is relatively higher in some mines. The challenge was to bring down the cost of excavation. We have brought it down significantly.
While financial strategies are fine, it would not have been possible without the support of the workers. They have also struck a chord with the company and are keen to give their best. Even as all stakeholders are constantly working towards building the enterprise, efforts are on to make workers more comfortable in their work environment.
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