Essar Ports, which today reported a 48 per cent jump in consolidated net profit at Rs 101.44 crore, is moving towards a dollar-based tariff structure to cut interest costs and mitigate the impact of falling rupee.

“We are trying to dollarise our earnings. The idea is that we will be able to borrow in dollars and have earnings in dollars, so we have a natural hedge and we get the advantage of lower cost of interests (on dollar loans),” Essar Ports Managing Director, Rajiv Agarwal said.

The company has started charging customers at the Hajira port on its dollar-based tariff structure. It is also in talks with customers for implementing the same at other locations as well.

According to the new structure, the company will report earnings in dollar and customers will be charged either in dollar or its equivalent value in rupee.

This will help the company in cutting its interest costs, which have gone too high and also cushion the impact of falling rupee as both, debt and earnings being in dollar, will provide natural hedge to Essar.

Besides, the present interest rate regime in the country, at 12-12.5 per cent is unlikely to come down in near future, Agarwal said.

The company had incurred Rs 510 crore as finance costs in the last fiscal on a total income of Rs 1,434 crore. The company has a total debt of about Rs 5,800 crore at present and most of them are in rupee only.

During the last quarter, ended June 30, 2013, its interest outgo was about Rs 140 crore.

“We are trying whether and how much we can convert our debt into dollars because today interest cost is 12-12.5 per cent and we don’t see any chance of reduction due to what has been happening in last few months. The chance of any reduction in interest rates is very remote,” Agarwal said.

He, however, declined to comment on how much of Rs 5,800 crore debt pile of the company would get converted into dollar loans as “the quantum will depend on permission from Reserve Bank of India”.

Some time back, the RBI has rejected Essar Ports application for going for external commercial borrowings for about Rs 1,500 crore as the company did not had any dollar earnings and thereby, no natural hedge for its exposure in that currency.

According to Agarwal, Essar is in touch with the RBI for approval and in next 6 months, the company may go for dollar loans. The company is also exploring the option of taking loan from IIFCL through its take out financing scheme.

Meanwhile, the company today reported a 48 per cent growth in its consolidated net profit at Rs 101.44 crore.

Revenues at Rs 399 crore grew 22 per cent. No major increase in expenditure and depreciation of assets also helped the company in reporting higher growth in profit.

Shares of the company rose 2.69 per cent today to close at Rs 74.45 apiece on the BSE.

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