The Indian government has notified that state-owned steel company Rashtriya Ispat Nigam Limited (RINL) will be put up for strategic disinvestment of its government equity holding if the steel producer fails to achieve a financial turnaround within a specific timeframe, a government official said on Thursday, September 7.
The official said that the Department of Public Enterprises, the apex governing body for government-owned companies, has stated that RINL will have to achieve a turnaround from making losses of $193 million in the financial year 2016-17, or the government will go ahead with selling part of its equity holding in RINL while maintaining a majority holding.
The government official pointed out that a strategic equity sale in RINL in the face of sustained losses is in line with the government’s existing policy as it has finalized a similar action plan to divest equity holding in three wholly-owned steel producing subsidiaries of Steel Authority of India Limited (SAIL).
However, no indication is available on the timeframe set by the government for RINL to achieve a financial turnaround.
India’s Ministry of Steel has appointed a committee to monitor and periodically report on the operational and financial parameters of RNIL and other government steel companies recording losses.
RINL operates a 3 million mt per year steel mill in the coastal town of Vishakhapatnam in the southern state of Andhra Pradesh and is in the process of increasing capacity first to 6.3 million mt per year and will subsequently add another 1 million mt over the next two years.
A company official said that RINL which has posted losses in the past two financial years will close the current year with a net loss but with a cash profit. In the financial year 2018-19, RINL on completion of expansion will be able to leverage higher volumes and achieve a financial turnaround, the official added.