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Reduced debt and improved financials helped JSW Group come out of Credit Suisse’s infamous ‘House of Debt’ list, the only company to do so.
Companies are included in the list, which is released periodically by the global financial services company, when their interest coverage ratio remains below one for four consecutive quarters.
JSW Steel has reduced its debt by ₹1,400 crore in the September quarter and will trim it further by another ₹1,100 crore by end of this year. The company’s overall debt will fall from ₹45,000 crore to ₹42,500 crore by December.
The health of most steel companies have improved over the past few quarters, with the government levying a Minimum Import Price and restricting cheap imports.
Seshagiri Rao, Joint Managing Director and Group CFO, JSW Steel, told BusinessLine that the company stood quite comfortable on debt even before its recent debt repayments
However, in the December quarter last year, the interest coverage ratio had gone below one as there was a huge provision made for impairment of assets. In the last year, the ratio had gone below one “only once or twice”, when steel prices fell drastically due to cheap imports. In the March quarter, the interest coverage was close to two. “When JSW Group was included in the House of Debt list we had objected. They cited foreign exchange loans and fall in interest coverage as reasons for including the company in the list,” he said. “We explained that holding 45 per cent of debt in foreign currency is not a concern as JSW Steel is the country’s largest exporter. With improvement in other financial parameters, they decided to remove the Group’s name from the list,” he added.
Along with reduction in debt, JSW Steel has seen a 25 per cent increase in production and sales with its 4 million tonnes capacity going on stream. In the first six months of this fiscal, JSW Steel has registered an EBITDA of ₹6,230 crore against the ₹6,100 crore it logged last fiscal.
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