The primary Indian steel producers are expected to reduce their aggregate debt by an estimated $4.86 billion over the course of the next two fiscal years using higher operating profit generation, according to a report by Indian rating agency Crisil.
The Crisil report said that reduction of debt and partial deferral of capital expenditure will strengthen the balance sheet and credit matrix of the five largest primary steel producers in the country which account for around 55 percent of the country’s total steel production.
The report has forecast that the primary steel producers are expected to reduce their aggregate debt by $3.47 billion in the fiscal year 2020-21 and by another $1.38 billion in the fiscal year 2021-22.
Crisil said that domestic demand recovered strongly in the second half of the current fiscal year, rising by 10 percent in the October-January period, versus a 30 percent contraction during the first half, on year-on-year basis, and this will consequently improve the operating profits of the primary steel producers.
Cash accruals of primary steel producers are forecast to surge by over 40 percent on year-on-year basis to around $5.55 billion this fiscal year, and to rise further by 10 percent in the fiscal year 2021-22, and reduction of capital expenditure and paring of debts will bolster the balance sheets which have been hit by the pandemic, Crisil said.