SAIL’s Gross Debt Falls To Five-Year Low

Steel Authority of India Ltd.’s gross debt fell to the lowest in five years, in line with the company’s focus on reducing borrowings, dragging down its leverage.

The steelmaker’s gross debt fell to Rs 35,330 crore as of March 2021 compared with Rs 51,481 crore a year ago, according to a media statement. This is expected to bring down its gross leverage to around 3 times for the fiscal ended March 2021 — the lowest since at least 2014-15, according to BloombergQuint calculations.

SAIL’s focussed approach on improving volumes, improving operational efficiencies, operating at optimum levels, deleveraging its balance sheet and reducing its inventory levels, among others, helped the company in the quarter ended March, Chairman Soma Mondal was quoted as saying in the statement.

According to India Infoline’s third-quarter report, healthy deleveraging was underway for the company following steel prices and healthy profitability over the past two quarters. SAIL had reduced its gross debt to Rs 46,600 crore by December 2020 from Rs 54,400 crore as of June. It aimed to lower its borrowings to below Rs 40,000 crore by March.

Motilal Oswal in its March 24 report had said higher free cash flow should drive significant deleveraging for the company, which in turn should boost its equity value.

The steelmaker’s stock rose more than 5.8% in early trade Monday. It has gained more than 242% over the last year. Of the 22 analysts tracking SAIL, 16 suggest a ‘buy’ rating, with an average of Bloomberg consensus 12-month price target implying a potential downside of close to 2%.