SAIL OPEN TO TAKING OVER STRESSED ASSETS

Public sector steel major Steel Authority of India (SAIL) is willing to take over a stressed asset if it is offered. “We are very open to the idea. But, we would like to inherit a good asset. It should add value to our company and we should also be able to add value. If any good quality asset comes up, we can apply our expertise,” SAIL Chairman P K Singh told Business Standard when asked whether the company would be interested in taking over a stressed asset.

Public sector steel major Steel Authority of India Ltd (SAIL) is willing to take over a stressed asset if it is offered.

“We are very open to the idea. But, we would like to inherit a good asset. It should add value to our company and we should also be able to add value. If any good quality asset comes up, we can apply our expertise,” SAIL Chairman P K Singh told

Business Standard when asked whether the company would be interested in taking over a stressed asset.

In case an asset is put on the block, a public sector company could become the first port of call for public sector banks. In fact, banks had explored the option of giving the management of at least two steel companies where they had invoked strategic debt restructuring. However, nothing materialised.

A CARE Ratings report said according to the RBI’s Financial Stability Report, the stressed advanced ratio was the highest for basic metals and their products at 42.9 per cent as of September 2016.

Singh said, if the asset quality was good, then SAIL would be open to management control or ownership of it.

He pointed out SAIL had the expertise to the run a plant, and it had raw material security and one of the largest pool of skilled manpower.

Moreover, SAIL had set an ambitious target of achieving a capacity of 50 million tonnes. The addition of a stressed asset could become part of the 50-million tonnes (mt) target.

SAIL has, in the past, taken over assets like Visvesvaraya Iron & Steel Ltd (VISL) and Chandrapur Ferro Alloy Plant. VISL, originally founded by the State of Mysore, was taken over by SAIL in 1989; Chandrapur Ferro Alloy Plant, formerly Maharashtra Elektrosmelt, came into SAIL’s fold in 2011.

“Growing a company doesn’t only mean setting up greenfield plants,” Singh explained.

However, the SAIL chairman also clarified that the public sector’s first priority was to manage its own house.

“First, we need to stabilise our own units, they should become world class. If something is offered to us in parallel, we will explore the option,” he said.

Over the next one-two years, SAIL will be ramping up capacity and will achieve a finished steel capacity of 21 mt from a level of 12.4 mt. The investment in the modernisation is nearly ~70,000 crore.

The modernisation and expansion is expected to bring out benefits in terms of product mix, reduced costs, improved realisations, improved market share and better margins.

It is also expected to improve cash flows and once that happens that 50-mt capacity plan could be taken up. But, the bigger consideration could be consumption and demand. “We are a commercial organisation and investment will come at a cost. Higher returns on investment will come only if consumption is higher,” Singh pointed out.

“WE ARE VERY OPEN TO THE IDEA. BUT, WE WOULD LIKE TO INHERIT A GOOD ASSET. IT SHOULD ADD VALUE TO OUR COMPANY AND WE SHOULD ALSO BE ABLE TO ADD VALUE” P K SINGH, SAIL chairman