Book Value: Rs.50.94
Shareholding Pattern: The Promoters hold a whooping 72% stake in the company while the general public holds 28%. The high promoter holding, makes the stock look even more attractive. Moreover, the corporate bodies hold 7.26% of the shares of the company.
Financials: In the June, 2014 quarteer, the company came out with a little subdued topline and a better bottomline when speaking sequentially. The total income of the company for Q1FY15 came out to be Rs.438.32 Cr as against Rs.668.26 Cr in Q4FY14. The net loss of the company decreased to 96.56 Cr as against Rs.117.54 Cr in Q4FY14. However, this is expected to improve considerably in the coming days as Captive Power Plant of 67.5 MW and 33 MVA Furnace are about to start operation within a very short time:
CORPORATE DEBT RESTRUCTURING:
During the financial year FY15, at the request of the Company, the Corporate Debt Restructuring Proposal (CDR Proposal) was referred to CDR Empowered Group (CDR EG) by the consortium of lenders led by State Bank of India (SBI). The CDR Proposal as recommended by SBI was approved by CDR EG on March 24, 2014 and communicated vide Letter of Approval dated 28th March, 2014, as amended / modified from time to time. Under CDR package, the Company’s debts were restructured / rescheduled and additional credit facilities have been sanctioned as set out in the said Letter of Approval. The cut off date for CDR package was September 30, 2013 and the implementation is under progress. Pending implementation, the financial effect thereof has been taken into accounts.
The CDR Package includes reliefs / measures such as reduction in interest rates, funding of interest, rearrangement of securities etc. The key features of the CDR Proposal are as follows:
(i) Repayment of Rupee Term Loans (RTL) (except term loan for Captive Power Plant of the Company) after moratorium of 2 years from the cut-off date in 32 structured quarterly installments commencing from December 31, 2015 to September 30, 2023.
(ii) Repayment of Rupee Term Loans for Captive Power Plant of the Company after moratorium of 2 years from the cut-off date in 38 structured quarterly installments commencing from December 31, 2015 to March 31, 2025.
(iii) Conversion of various irregular/outstanding/devolved financial facilities into Working Capital Term Loan (‘WCTL’).
Repayment of WCTL after moratorium period of 2 years from cut-off date in 32 structured quarterly installments commencing from December 31, 2015 to September 30, 2023.
(iv) Restructuring of existing fund based and non fund based financial facilities.
(v) Interest on RTL and WCTL during the moratorium period of 2 years from cut-off date and interest on Cash Credit limit for a period of 9 months from the cut-off date shall be converted to FITL. Repayment of FITL would be done in 18 equal quarterly installments commencing from December 31, 2015 to March 31, 2020.
(vi) The rate of interest on RTL, WCTL, FITL and Fund Based Working Capital Facilities shall be 11% (linked to the base rate of SBI) with the right to reset the rate of the Term loan(s) and FITL every year with the approval of CDR-EG.
(vii) Waiver of penal interest for irregularities in the Cash Credit accounts for the period from cut-off date to the date of implementation of the package.
(viii) Contribution of ` 5,664 lacs in the Company by the promoters in lieu of bank sacrifices and ` 8,577 lacs to meet the additional cost over run towards the Captive Power Plant project of the Company. The contribution is to be brought initially in the form of unsecured loan by September 30, 2014 and the same is to be converted into equity by March 31, 2015.
(ix) The CDR Package as well as the provisions of the Master Circular on Corporate Debt Restructuring issued by the Reserve Bank of India, gives a right to the CDR Lenders to get a recompense of their waivers and sacrifices made as part of the CDR Proposal. The recompense payable by the Company is contingent on various factors, the outcome of which currently is materially uncertain and hence the proportionate amount payable as recompense has been treated as a contingent liability. The aggregate present value of the outstanding sacrifice made/ to be made by CDR. Lenders as per the CDR package is approximately Rs.69,987 lacs.
- Revamped it operations: The Company undertook several steps to lowering the overheads and aligning resources with current level of operations. The Company is focusing on cost competitiveness. The Company is brought under the Corporate Debt Restructuring (CDR) Scheme for nursing it to profitability. The management has adopted focused and aggressive business strategies and functions to improve the sales and profitability of the Company. Considering the present sign of improvement in overall business environment, the Company is expecting an increase in its revenue and profitability. The Management is confident of higher growth future.
- Expansion Projects under Implementation: The basic engineering and civil and structural work of Captive Power Plant of 67.5 MW & 33 MVA Furnace is completed. Due to delay in delivery of the some major equipment’s having long lead time the project is not completed in its schedule time. The Company expects to commence the commercial operation of the said projects by the end of December, 2014.
- Coal Mines: In FY14, the coking coal mine in Indonesia owned by M/s. PT Bara Prima Mandiri through the Subsidiary SKP Overseas Pte. Ltd., Singapore has started commercial production. The mine located in Central Kalimantan province of Indonesia has an estimated coking coal reserve of 10 MN Tonnes. The Company is also having 60% economic interest in a thermal coal mine in Indonesia owned by M/s PT Palopo Indah Raya through its aforesaid Subsidiary. The mine located in Central Kalimantan province of Indonesia has an estimated thermal coal reserves of 20 MN Tonnes.
- Credit Rating: The Company’s credit rating for Long-Term debts/facilities is BB- (Double B minus), for Long-Term/Short-Term debts/facilities is BB-/A4 (double B minus/A Four) and Short-Term facilities is A4 (A Four), rated by the Credit Analysis & Research Limited (CARE).
- Government relaxes FDI norms for construction, real estate sector: In a boost to cash-starved real estate industry, the NDA government yesterday relaxed rules for FDI in the construction sector by reducing minimum built-up area as well as capital requirement and easing the exit norms.The proposal to amend the FDI policy in construction development sector was approved by the Union Cabinet. In view of depleting FDI inflow in construction and real estate sector in last couple of years, the Cabinet decided to reduce the minimum floor area to 20,000 sq mt from the earlier 50,000 sq mt. It also brought down the minimum capital requirement to USD 5 million from USD 10 million. This is likely to boost the demand for steel and other construction materials.
- Indian Growth Story to stoke demand: The demand for ferro alloys is driven by steel production, which in turn depends on growth from the infrastructure, housing, automobile and consumer durable industries. The Industry has tremendous potential for growth as the per capita steel consumption in the country is one of the lowest in the world. With burgeoning population, drive towards industrialisaton and focus on better quality of life, the steel demand in the country is expected to rise significantly which will in turn, drive Ferro-alloys demand as these are key input resources for iron and steel manufacture. Electrical energy is one of the major input in production of ferro alloys and high power tariff is a threat for the Ferro alloys industry. To mitigate the increasing power cost risk the ferro alloys producers are now focusing on setting up their captive power units. This will help to reduce the input cost and ensures continuous supply of power to the downstream project. The usage and application of Stainless Steel is likely to expand in various fields like house ware, hardware, furniture, machinery, railways, building, construction, and automotive industry, due to the pro-active measures of the new NDA Government. The per capita consumption of stainless steel in India is around 2 kg. The low per capita consumption of stainless steel, provides ample opportunity for growth at domestic level.
- Prudent Cost Management to shore up bottomline: The cost-effective availability and quality of essential raw material is a global challenge. The volatility in prices of raw materials including the mismatch between the prices of raw materials and ferro alloys as well as limitation on and disruption in the supply of inputs could adversely affect the profitability of the Company.The Company is maintaining a healthy position for key raw materials having arrangements with domestic and international ore suppliers. The Company continues to closely monitor market conditions and seek to put in place contractual arrangement to ensure security of key inputs. The Company has access to coking and thermal coal mine owned through its wholly owned subsidiary Company. Electricity comprises a key cost component in the total operating cost structure and the high administered prices of this essential input impact the competitiveness of ferro alloy and iron and steel industry. The ferro-alloys producers are now focusing on making their units self reliant by setting up their own power units. This not only reduces the input cost but also ensure continuous supply of power. The 67.5 MW captive power plant, under implementation shall enable the Company to emerge self-reliant in its power needs and reduce dependence on the expensive grid electricity. The untapped potential of increasing the consumption, even to reach at the comparable position of developing economy, a quantum jump in the iron and steel will be required. The Company’s sales are well-spread to key consumption centers at the domestic and international level. The Company is developing new market segment and enhancing value added services to its customers.
- Debt Restructuring: The Corporate Debt Restructuring Scheme (CDR) of the Company was approved by the CDR -EG in their meeting held on 24th March, 2014. A debt of Rs.1,854.56 Crores has been restructured, additional fund provided and future interest funded. The re-structuring was based on the Techno-Economic Viability study which was conducted by an independent third party consultants appointed by the Monitoring Institute, State Bank of India (SBI). The Company has executed the Master Restructuring Agreement (MRA) and other documents with the lender bankers on 31st March, 2014 and also fulfilled the pre-requisite conditions for the implementation of the CDR Scheme. This is expected to have a positive effect on both the top and bottomlines of the company.
- Positives from the Union Budget, 2015: Rohit Ferro-Tech Ltd, gained from the rise in the custom duty from 5% to 7.5% in the budget FY15. The proposed duty structure has already eased muh of the worries of companies like Rohit Ferro, which has a 274,000-tonne capacity to produce ferro alloys used in stainless steel making. Also, it will benefit because of its forward integration, which includes 100,000-tonne stainless steel capacity.
- Benefits from exports, due to rupee depreciation: It is one of the major ferro alloys manufacturer in India as well as having an important presence in the international arena with exports contributing 70% of its produce. With the demand for Indian steel expected to rise to about 110 million tons by FY19-20, the ferro alloys sector is expected to remain buoyant, in the coming days as the government of India gives more impetus to the construction sector. The steel industry is likely to grow on the back of heavy investment in infrastructure projects and auto. The company exports its products to China, Russia, Japan, South Korea, Taiwan, Vietnam, the Philippines, Indonesia, Thailand, Daman, Abu Dhabi, Kuwait, the United Arab Emirates, Turkey, Ukraine, Italy, Greece, Nigeria, Spain, Austria, the Netherlands, Germany, Sweden, the Czech Republic, Slovakia, Brazil, Argentina, Peru, and the United States.
- Backward Integration: Acquisition of coal mines in Indonesia. Setting up of captive power plants. Through these measures the operating margins of the company are expected to improve over a period of time Setting up of a 100,000 MTPA stainless steel facility in Bishnupur, West Bengal. It is an attempt to forward integrate and to work extensively on the front of end use of the Ferro Alloys.