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In a first, Rashtriya Ispat Nigam Ltd (RINL), the second largest steel-making PSU, has mooted the idea of swapping raw materials with finished steel as it looks at funding working capital need and also to overcome raw material supply constraint.
The company has already initiated talks with some larger steel mills of the country for such a product swap, and has floated expression of interest inviting bids for the same.
Bids are yet to be submitted, those in the know saw. The last date for bid submission is April 15.
The steel maker, which is on the Centre’s disinvestment radar, will subsequently engage with the partners to evolve a business model and “finalise the terms and conditions”, its said in the bid document.
Partnership terms
RINL, the corporate entity for Vizag Steel, said it would “look to partner with companies having interests in steel and steel making raw materials” and invited “business proposals” for supplying steel to them.
The steel maker said, a potential partner, can participate by way of supplying one or more key raw materials – like coking coal, blast furnace coke, or iron ore and in place “take steel products” as per mutually agreed terms and conditions.
The partner can also fund the working capital (pay the expense for steel making) and in turn take steel products. “Interested partners could take up any one or both the options,” an official said adding, “The EOI respondents should be in the business of steel or steel making raw materials.”
RINL, despite it being among the few integrated steel plants to have proximity to two ports – Vizag and Gangavaram, does not have mine linkages for iron-ore and coal. Cost of coal and iron ore procurement in FY22 stood at ₹9,051.13 crore and ₹7,213.17 crore, respectively. Raw material costs were 64 per cent of the company’s expenditure in FY22
Finances
From FY16 to FY18, RINL reported losses to the tune of ₹1,604 crore, ₹1,263 crore and ₹1,369 crore respectively; before registering a ₹97 crore profit in FY19. In FY20 and FY21, it reported losses again to the tune of ₹3,910 crore and ₹1,012 crore.
It has negative reserves and surplus since FY20. In accounting parlance, negative reserves and surplus are indicative of accumulated losses. In FY20, FY21 and FY22, the negative reserves stood at ₹1,618 crore, ₹2,649 crore and ₹1,715 crore.
Ministry officials reportedly has ruled out plans to pool funds through IPO or issue of government bonds for collateral free loans.
PAT positive in Q1FY24?
Incidentally, the RINL CMD, Atul Bhat, while addressing the RINL collective on April 1, acknowledged that “FY23 has been the most difficult year due to the multiple challenges”. According to him, the steel maker could turn PAT positive in Q1FY24 (April - June).
“Our organisation can turn profit after tax (PAT) positive in the 1st quarter,” he said adding that in terms of raw material securitisation, the Odisha Mineral Development corporation, (OMDC), one of its subsidiary, could achieve significant progress towards resumption of mining operations.
“This would not only provide raw material security to RINL but also provide income in the form of dividends.”
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