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HSCL gets Rs. 587cr financial makeover

The Finance Minister Pranab Mukherjee has cleared the modified financial restructuring package for Hindustan Steelworks Construction Ltd (HSCL).
Top Government sources said that the Rs. 586.91-crore restructuring package, one of the largest in the post-liberalisation period, was cleared on May 10.
The revised package also permits conversion of the non-Plan loan of Rs. 513.10 crore into 30-year, 5 per cent, non-cumulative preferential shares, repayable in 10 instalments starting from March 31, 2031.

HSCL’s administrative ministry, the Ministry of Steel, dropped the earlier proposals of seeking waiver of the non-Plan loan and reimbursement of interest subsidy of Rs. 23.10 crore.

Waiver of accrued interest on non-Plan loan of Rs. 418.20 crore (as on June 30, 2010), however, remained a major part of the approved restructuring by the Finance Ministry. The Ministry also conceded waiver of outstanding guarantee commission of Rs. 26.84 crore on term loan, bank guarantee and cash credit.
The Steel Ministry would now move a fresh note for the seal of approval from the Cabinet Committee on Economic Affairs, targeted by the end of June, the sources added.

The clearance would allow the Kolkata-headquartered Rs. 1,000-crore public sector infrastructure company to record its first net profit after 10 years in 2010-11. The Finance Ministry has allowed a grant-in-aid of Rs. 73 crore for I-T liability arising out of windfall profit on implementation of the restructuring.

Already in a turnaround mode, the Government-owned HSCL has been steadily increasing its operating profits since 2002-03. The restructuring would lift the ban on recruitments too. Though the effective date of restructuring would be June 30, 2010, HSCL’s repayment of Rs. 518 crore bank loan would begin next financial year.
The company will have to repay the principal term loan in 10 yearly equal instalments of Rs. 51.8 crore. The Government will continue to pay interest subsidy on the loan. The Government will also continue to provide guarantee on HSCL’s diminishing term loan throughout its tenure.

According to the latest plan, the Government guarantee and interest subsidy will continue at a 50-basis point higher than comparable G-Sec rate.
The other components of the agreed restructuring are conversion of Plan loan of Rs. 36.50 crore and the accrued interest on it of Rs. 32.37 crore into equity.
In another development, HSCL has entered into a pact with Russia’s Vo Zarubezhugol (VOZ) to jointly bid for building coal washeries in India for major producers.

“HSCL is in a position to procure business for setting up of coal washeries in India on turnkey basis. We have signed a MoU with VOZ. VOZ will provide turnkey solution to us,” HSCL chairman & managing director Malay Chatterjee said in a statement. VOZ, a Russian state-owned firm, is engaged in building coal washeries, mining and trading of coal. HSCL is engaged in building steel and various other infrastructure projects.

Washeries help reduce the ash content in coal and improve its calorific value among others things. HSCL, which is looking at entering into the coal sector in a large way, might look at this opportunity following the tie-up with VOZ.

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