Electrosteel Cast

Electrosteel Castings is a water infrastructure company, based in Khardah near Kolkata. The company manufactures ductile iron pipes – the largest in India – and ductile iron pipe fittings. For some time now, the company’s performance seems to have taken a downturn.

Tides have turned for the worst for this company. It was awarded two coal blocks and now those, under the new Supreme Court ruling, stands cancelled. Both the blocks were in Jharkhand and it is now seeking compensation for the same. Its block at Parbatpur - an Ordinance issued by the Central Government has allowed the company to continue operations here till March 31, 2015. The company has spent Rs.57 crore so far on the block as capital work is in progress. It has filed a compensation claim Rs.1,220.71 crore for the Parbatpur coal block.  The other coal block, North Dhadhu, is not operational yet, but Electrosteel says it has made an initial investment of Rs.8.23 crore. In current Q3FY15, liability on account of additional levy of Rs.295/MT arising out of the said Ordinance against extracted coal comes to Rs.34 crore, having an impact of Rs.12.52 crore on working results  have been given effect in the performance of Q3.

On the financial performance front, apart from the overhang of these cancellations, the high debt and costs continued to impact. It posted a 21% (YoY) rise in net sales at Rs.597 crore but thanks to a 29% rise in operating costs and 14% jump in interest outgo at Rs.41 crore, the company ended the quarter with a net profit at Rs.16 crore, down 53%. The company’s debt stands at around Rs.6950 crore. Through an associate company, Electrosteel Steels, the company has initiated a steel making project which has run into severe cost overruns and execution delays causing a lot of financial stress. Now with the cancellation of blocks, things have turned sticky for the company.