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Now Tisco wants loan waiver from government - Views on News from Equitymaster

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Now Tisco wants loan waiver from government

Feb 24, 2000

Close on the heels of the government's decision to waive of Rs 50 bn worth of debt that was given the state owned Steel Authority of India (Sail), Tata Iron and Steel (Tisco) has demanded a similar waiver. Tisco (FY99 Net Sales Rs 62,746 m), a part of the Tata Group, is India's largest integrated private sector steel producer. Tata Steel is one of the original contributors to the Steel Development Fund (SDF). The company has currently taken a loan of Rs 12 bn from this source.

The government seems to have opened a pandora's box by waiving off the loan given to SAIL. The private sector steel companies had earlier initiated measures to the block the government's proposed measure.

For Tisco, a waiver of the loan would imply cost savings of Rs 800 m per year, resulting in an improvement in overall profitability. The decline in leverage would once again make it possible for the company to take debt to finance fresh initiatives to modernise its plants and/or to acquire companies.

The government has put itself in a fix by granting a loan waiver to the state owned Sail. Possibly more companies will demand the same from the government in the coming days. Even though it is well recognised that Sail was on the point of bankruptcy, this differential treatment is likely to throw up some interesting events in the coming months.


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