Sathavahana Ispat Ltd is in talks with Piramal Enterprises Ltd’s structured financing group (SFG) and others to raise as much as Rs500 crore in debt funding, two people aware of the development said. “They are in talks with Piramal’s SFG to raise around Rs400-500 crore. The idea is to refinance their entire existing debt to bring down the financing cost for the company in order to improve financial performance,” said one of the two people cited above, requesting anonymity, as the talks are private. The company, which reported a profit of Rs25.83 crore in 2014-15, reported a loss of Rs34.34 crore in 2015-16 as financing costs more than doubled to Rs104.29 crore.
Sathavahana Ispat is engaged in the manufacture and sale of pig iron with a capacity of 210,000 tonnes per annum and metallurgical coke with a capacity of 450,000 tonnes per annum. The company has also set up a 210,000 tonnes per annum ductile iron-making plant and a 25,000 tonnes per annum ductile iron pipe fittings plant. The company was founded by first-generation entrepreneur A.S. Rao in 1989. Sathavahana’s long-term debt as on 31 March 2016 was Rs368 crore, according to the company’s filings with stock exchanges. The company’s revenue grew 16.7% to Rs1,232.24 crore in 2015-16 from Rs1,055.85 crore in the previous year.
Rao, executive vice-chairman of Sathavahana Ispat, declined to comment on the development. A Piramal SFG spokesperson also declined to comment. Piramal SFG, the non-real estate financing business unit of Piramal Enterprises, is expanding its product portfolio from mezzanine funding to include offerings such as loans against shares and senior debt. It is also expanding its sector focus beyond its core area of infrastructure and renewable energy. On 23 August, Mint reported that Piramal SFG had agreed to invest Rs150 crore in Smaaash Entertainment Pvt. Ltd, a sports-based entertainment firm co-owned by cricketer Sachin Tendulkar. The investment management firm has been looking aggressively at infrastructure too.
Renewable energy producer Mytrah Energy India Pvt. Ltd is also close to raising around Rs800 crore (about $120 million) from Piramal SFG. In August, Mint reported that the SFG was investing around Rs800 crore in Delhi-based solar power producer ACME Solar. It announced an investment of $132 million (Rs900 crore) in Essel Infrastructure Ltd’s solar platform across India in March. Some of the other infrastructure investments by Piramal SFG include a Rs615.5 crore funding in two cement firms and buying non-convertible debentures (NCDs) of Sanghi Industries Ltd, the flagship company of the Ravi Sanghi Group, worth Rs265.50 crore. Piramal SFG has also invested Rs350 crore in NCL Industries Ltd, the owner of the Nagarjuna Cement brand; Rs500 crore in Green Infra, an alternative energy firm; and Rs425 crore in Navayuga Roads, according to its website. Piramal Enterprises plans to deploy about Rs10,000 crore from Piramal SFG’s book over the next couple of years.