RINL in talks with SBI-led consortium of banks to refinance long-term loans

Ahead of its second round of fund infusion — of approximately ₹1,500 crore due in April — PSU steel-maker RINL (Rashtriya Ispat Nigam Ltd) has initiated a fresh round of discussions with an SBI-led consortium of banks to refinance its high-interest bearing long-term loans. The talks include a proposal for the Andhra Pradesh government to pick up stake in the company as equity infusion in lieu of power supply.

Sources told businessline that the steel-maker is seeking rates of “around 7 per cent at par with industry”, as against the current 9 per cent interest bearing option. It is also in discussion for better repayment options and an improved line of credit (working capital) from banks.

Refinancing a loan means replacing an existing loan with a new one, typically to secure better terms like a lower interest rate or a shorter repayment period.

“Meeting proposed between SBICAPS and APEPDCL to work out the modalities of equity infusion on account of power charges,” the official added.

Loans as on February 1 include ₹187 crore to Union Bank, ₹686 crore at nearly 10.50 per cent interest to IDBI, ₹100 crore at 11 per cent to PNB, ₹5,155 crore to SBI at 10.70 per cent, ₹1,674 crore to Canara Bank at over 10 per cent, and ₹1,055 crore to Indian Bank at 10 per cent.

Earlier in January, RINL secured a ₹11,000-crore revival package from the Cabinet.

Negotiations on Interest Rate Cut

Older loans were previously serviced at 11-12 per cent, and some as high as 14-15 per cent interest, Ministry sources said.

And, the funding deficit as per a Cabinet note was based on an average interest rate of 9 per cent (considering it had high debt servicing cost).

“In the fist round, the banks agreed to bring interest rates down to 8.95 per cent, but the pitch from RINL now is to refinance these loans at 7-7.5 per cent, at par with industry,” the official said.

The Steel Ministry and RINL are yet to respond to queries by businessline.

Banks had previously classified the account as standard after working capital repayments were made earlier this year.

Revival plan

The Steel Ministry has roped in investment banker SBI Caps to prepare a revival package for the alloy-maker, that runs a 7.5 mtpa plant in Visakhapatnam, with direct port connectivity.

With two blast furnaces operational, RINL currently operates at 63 per cent capacity. The plan is to maintain production levels at 63 per cent till June.

Capacity utilisation is targeted at 72 per cent for the July-September period, when the the third blast furnace would become operational, while the capacity ramp-up would be around 92.5 per cent in the October-December period.

Nearly ₹3,300 crore–₹3,500 crore and ₹700 crore are seen as projected cost on a quarterly basis for securing coking coal and iron-ore, key feedstock in steel-making.