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Jindal Steel considers breakup plan to restructure Rs42,000cr debt

India’s biggest steelmaker Jindal Steel is considering a plan to split up its company to cut back its Rs42,000cr debt and boost investor confidence.

The Delhi-based company will probably divide its steel, power, and international businesses into three entities. However, any such plan would require the approval of the board, lenders, and regulators.

The steel major, which has come back from the brink of bankruptcy, is aiming to cut its debt ratio down to two times pre-tax earnings, from about five times, that is, by 15%, over the next four to five years.

The steel unit would include its coal mines. In 1993, Chairman Naveen Jindal’s group benefited when the government began awarding 218 coal mines to companies in-line with the proviso that they will invest in industrial projects and pay royalties. However, in 2014, SC cancelled most of these permits as illegal, and asked the producers to pay for the coal they had extracted. Meanwhile, its international vertical will include the Oman steel plant.

Nevertheless, the company’s woes might not end soon, with weak power demand, difficulty in getting coal supplies, and ED’s allegations of money laundering are keeping it wary.

The company’s stock is currently trading at Rs213.30 down by Rs7.4 or 3.35% from its previous closing of Rs220.70 on the BSE.

The scrip opened at Rs221.45 and has touched a high and low of Rs222.95 and Rs212.60 respectively. So far 24,23,438 (NSE+BSE) shares were traded on the counter. The current market cap of the company is Rs21,362.58cr.
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