The State-owned Steel Authority of India Ltd (SAIL), has refused to give the dividend to the Central government for the last fiscal year.
The largest steel producer in India said that it did not have "any cash and bank balance" and the debt-to-income ratio was much more than agreed with some lenders. Stock prices of the SAIL, having a market value of around $4.7 billion, later tanked 2 percent.
Mint reported that the announcement made by SAIL could add an additional burden for the central government to meet its budgeted target of raising Rs. 1.06 trillion ($14.95 billion) from dividends and profit of state-owned companies this financial year ending in March 2018. Interestingly, in the last fiscal year, the government fell 13 percent short of its target, receiving Rs. 1.23 billion.
SAIL said it had been due to pay out Rs. 21.71 billion, including tax to the government based on its "net-worth" last financial year.
In an explanation sent to the government, the steel company said, "SAIL does not have any cash and bank balance and would need to borrow from the market for payment of dividend. It is getting increasingly difficult to borrow further from the market in the current market conditions, especially for the steel sector, as the financial institutions and banks are reluctant to take further exposure on the steel industry." SAIL had posted a loss in FY18.
SAIL's net debt-to-earnings before interest, taxes, depreciation and amortization (EBITDA) ratio stood at 8.5, as against the 1.5 to 3.75 which the company agreed to with some of its foreign lenders. For the current financial year, the company has a debt due of Rs. 32.2 billion for repayment which will have to be met from borrowed funds.
Speaking to Mint, the company spokesperson said, "In the last three quarters, the company has been in profit and production is also ramping up although the loans do exist. But this year, the company will end up showing a net profit."
The share price of the SAIL plummeted more than 13 percent this year.
