Jai Balaji Industries Ltd, which featured among the second list of companies the RBI picked for debt resolution through the insolvency process, has refinanced existing debt held by two asset reconstruction companies, signalling the end of the current phase of financial restructuring.
The Calcutta-based secondary steel maker borrowed Rs 559 crore from Tata Capital at 12 per cent rate of interest to give exits to Edelweiss and Omkara ARCs, which had picked up loans from the commercial banks and helped JBG save itself from going into the insolvency process.
“By retiring the existing debt held by ARCs, we are taking a proactive approach to strengthen our financial position, setting the stage for sustained growth and success,” Aditya Jajodia, chairman and managing director of JBG, said.
The company, he informed, has lined up the expansion of ductile iron pipe and ferro alloy capacity over the next 12-18 months at an investment of Rs 550 crore. “We plan to finance it entirely from internal accrual without taking any further debt,” Jajodia added.
Jai Balaji reported an EBIDTA of Rs 450 crore in the first six months of FY24 and the stock price has multiplied by 10 times in the last six months. It closed at Rs 718.3, locked in the upper circuit of 5 per cent.
“There have not been many instances of such turnaround in the steel sector in India,” Jajodia argued, recalling the period between 2017 and 2019 when the company was struggling to meet debt obligations. It had a debt of Rs 3,200 crore when the RBI published the second list in 2017-18 featuring companies to be sent to insolvency.
The RBI’s first list of 12 companies included many steel companies, namely Essar Steel, Bhushan Steel, Bhushan Steel & Power, Electrosteel Steels and Monnet Ispat, accounting for a quarter of non performing assets of banks.
The second list also contained steel firms like JBG, Visa Steel, Asian Colour Coated Ispat, Uttam Galva Steels and Uttam Galva Metallics.
JBG will be a rare instance where the resolution of debt problems is achieved outside the corporate insolvency resolution process.
A number of firms featured in the RBI’s first and second list, especially from the steel sector, went to insolvency and changed hands, fetching good recovery of loan from banks.
Buoyed by the good tidings in the steel industry post-Covid, JBG recorded a net profit of Rs 57 and Rs 49 crore in FY23 and FY22, respectively, and Rs 371 crore in H1FY24.
Jajodia said the debt agreement with Tata Capital would be a game changer for the company. “It marks the beginning of a new chapter,” he added. JBG, which has two plants at Durgapur and one at Ranigunj, intends to double DI pipe making to 480,000 tonnes and ferro alloy by 60,000 tonnes.
