Bhushan Steel seeks Rs 7,000 crore loan; claims capacity expansion but banks consider it as rollover

MUMBAI: Bhushan Steel is negotiating with lenders led by State Bank of India for a Rs 7,000-crore loan, ostensibly for capacity expansion, but some bankers say it was a kind of rollover which may be needed to avoid a potential loan restructuring.

The metals company, which has already doubled its capacity in the past five years with huge debt, is seeking loans to avoid payment issues and the banks are also keen that the account does not lead to any increase in provisioning, said two bankers who did not want to be identified.

An account of Bhushan’s size, with a loan of Rs 28,000 crore, could be a drag on lenders if it is restructured, especially after the new set of rules come into force from April, they said.


“To avoid the restructuring tag and to adhere to the new norms, banks are sanctioning additional finance to borrowers as part of the rectification process to increase capacity and an element of refinance is bundled in as well,” said one of the bankers.

But the company says it is for capital expansion. “We are going for a capex proposal of Rs 4,400 crore for which a few banks have already sanctioned the loan, and balance we need to tie up is going on,” said Nittin Johri, director (finance), Bhushan Steel.

“This will mainly involve investments in putting up balancing facilities in our Odisha plant. We have not sought refinance of any loans.” The company’s debt has been rising as it doubled capacity in five years. Its finance cost for the December quarter rose 47.46 per cent to Rs 432.08 crore from Rs 293.01 crore a year earlier.

The steel maker reported a loss of Rs 54.79 crore in the December quarter against a net profit of Rs 221.20 crore a year ago. On the current capacity expansion, the company’s response was sketchy.

“We will be making some additions, modifications and putting up some new facilities like a boiler to utilise waste heat gas, expanding the colony and living quarters of our employees,” said Johri.