JSW Ispat Steel

In quarter ended Sep 2011, JSW Ispat Steel (erstwhile Ispat Industries) reported 4% increase in standalone net loss to Rs 345.30 crore primarily dented by incurring forex loss (against none in Sep 2010 quarter). Sans forex loss, the healthy operating performance and favorable non operating side halved the LBT before EO to Rs 250.05 crore. The standalone topline grew by 25% to Rs 2735.71 crore. Fall in raw material and power & fuel costs enabled the company to report operating profit margin (OPM) of 6.2% against operating loss margin (OLM) of 2.6% in Sep 2010 quarter. In effect, it reported operating profit of Rs 168.56 crore against operating loss of Rs 57.52 crore.

Quarterly Performance

The standalone operating income grew by healthy 25% to Rs 2735.71 crore. It includes gain of Rs 91.44 crore (against none in Sep 2010 quarter) on account of prepayment on NPV basis a portion of deferred value added/sales tax liability. Fall in raw material and power & fuel costs enabled the company to post OPM of 6.2% against OLM of 2.6%. In effect, it reported operating profit of Rs 168.56 crore against operating loss of Rs 57.52 crore. Raw material costs, as % to sales net stock adjusted, crashed by 450 bps to 67%. Also the power & fuel costs fell by notable 150 bps to 17%. The other expenditure crashed by whopping 310 bps to 7%. Only the staff cost rose by 10 bps to 3%.

LBT before EO crashed by 50% to Rs 250.05 crore on overall supportive non operating performance. The interest cost fell by 2% to Rs 279.11 crore while the depreciation cost declined by 4% to Rs 148.55 crore. It earned other income of Rs 9.05 crore (against none in Sep 2010 quarter). Unfortunately high forex loss of Rs 95.23 crore (against none in Sep 2010 quarter) on account of rapid depreciation of Indian Rupee against USD led to LBT after EO of Rs 345.28 crore, down by 30%. Further on accounting tax provision (against tax write back in Sep 2010 quarter), the net loss increased by 4% to Rs 345.30 crore.

• The Auditors had drawn attention in their audit report on the Company´s Accounts for fifteen months period ended June 30, 2010 and limited review report for the quarter ended March 31, 2011, regarding their inability to express any opinion on the recognition of net Deferred Tax Asset of Rs. 1308.76 crore upto year ended June 30, 2011.
  
  In view of the process improvements carried out for enhancing the steel-making capacity and operating efficiency, Company's Business Plans and strategies, improvement in net worth consequent on issue of equity shares to JSW Steel Limited, approval of the company´s proposals by its lenders through CDR mechanism, the company is virtually certain that there would be sufficient taxable income in the future to claim the deferred tax credit. The company has not recognized additional deferred tax asset (net) with effect from 1^st April 2011, as matter of prudence.
• During the quarter, the company has fully redeemed the 12% cumulative redeemable preference shares (CRPS) amounting to Rs 328.31 crore and 10% CRPS amounting to Rs 155.11 crore, pursuant to approval granted by CDR Empowered Group at its meeting held on 12^th January 2011 and requisite consent of the CRPS holders.
• Pursuant to the approval of CDR Empowered Group at its meeting held on January 12, 2011 and subsequent notices given to the Company by certain lenders for conversion of part of their outstanding dues into equity shares in the Company, the Securities Issue Committee of the Board of Directors of the Company, at its meeting held on March 31, 2011, had decided to allot 10,24,17,239 Equity Shares of Rs 10 each at a premium of Rs 4.74 per share to the respective lenders, subject to receipt of 'in principle' approval from the Stock Exchanges in terms of Clause 24(a) of the Listing Agreement. 'In principle' approval of Bombay Stock Exchange Ltd. has since been received, while approval of National Stock Exchange of India Ltd. is still awaited.
• The Promoters and promoter group share holding (excluding the GDR in public shareholding) stands unchanged at 69.99% as on 30^th Sep 2011. Out of this, the no. of shares pledged by promoters' is 20.02%.

The scrip is closed at Rs 12.72 (down 2.75%) on BSE on 11^th November 2011.

JSW Ispat Steel: Company Results