SAIL Commences Deleveraging Ahead of ₹1-Lakh-Cr Capex and Modernization Plan

Steel Authority of India Ltd (SAIL), the largest state-owned steel manufacturer, has set in motion a deleveraging strategy with the aim of reducing its debt to approximately Rs. 22,000 crore. This move, representing a 10-12% reduction compared to the previous fiscal year, is strategically designed to maintain a debt-equity ratio of 1:1.

The deleveraging initiative, initiated in the second quarter (July–September), is anticipated to gain momentum in the second half of the fiscal year (October–March). This proactive approach precedes SAIL's ambitious Rs. 1 lakh crore capital expenditure (capex) and modernization endeavors.

As of September 30, 2023, SAIL's net debt stood at approximately Rs. 25,000 crore, exhibiting a reduction from the FY23-end figure of around Rs. 25,500 crore. The debt has notably decreased by over Rs 4,000 crore from the substantial Rs. 29,000 crore recorded in the first quarter (April–June).

Anil Tulsiani, Director (Finance) at SAIL, provided insights into the debt reduction plan, indicating a target of Rs. 3,500 crore on a year-to-year basis, set against a capex earmarked for FY24 amounting to Rs 5,500 crore. However, considerations arise as capex is expected to intensify post FY25, potentially imposing constraints on the deleveraging plans, even in the absence of a "bunching up" of the capex.

Cash flows are anticipated to remain within the range of Rs 25,000 crore for approximately four years, with exceptions during the projected peak period of modernization in FY28. This significant modernization phase aims to add 3.5–4 million tonnes (mt) to SAIL's production capacity.

For the fiscal year FY24, SAIL's production and sales targets are set at around 19 mt, reflecting the company's strategic trajectory amid the evolving economic landscape.

HBL