Mumbai: State-owned steel manufacturer, Steel Authority of India (SAIL) has said that the impact of Covid-19 in the financial results of FY 2020 was Rs 771.76 crore on account of fall in the net realisable value of inventories.
âOperating plants at sub-optimal levels, lack of domestic demand for steel in the country, and un-remunerative prices are having an adverse impact on the financials of the company,â said SAIL in a statement.
The slowdown in sales, and cash realisations, has put a strain on the financial resources of the company due to which the total borrowings increased by around Rs 500 crore during the first quarter of the financial year 2021.
âThe realisation from Debtors has been low. However, cash conservation efforts initiated during this period have helped in keeping the borrowing levels under control,â the company said.
As per SAILâs statement, sufficient lines of credit are available with the company to tap loans from cheaper sources from time to time for repayment or swapping of old loans. The company sees no threats to service debt obligations on time.
The disclosure by SAIL comes following the SEBIâs 20th May circular on âadvisory on disclosure of material impact of CoVID-19 pandemic on listed entities under SEBI (Listing Obligations and Disclosure Requirements) Regulations 2015â.
Though there was shrinkage in demand for steel, the supply of raw materials was not impacted much, except for certain imported spares. Staggered deliveries of bulk raw materials, in sync with requirements, helped in maintaining the inventories at normal levels, SAIL said in a statement on Saturday.
âSAIL is closely monitoring the situation and adjusting its production based on demand for specific products. With the gradual opening up of the economy, it is expected that there will be an increase in steel demand,â the statement said.
Moodyâs investor service, in its recent sector report said that the rapid and widening spread of the Coronavirus outbreak, deteriorating global economic outlook, falling oil prices and asset price declines are creating a severe and extensive credit shock across many sectors, regions and markets. The steel sector has been one of the sectors most significantly affected by the shock, given its sensitivity to consumer demand and sentiment, the agency noted.
âLacklustre domestic demand is a key concern for steel prices. If the decline in Far East prices sustains, export realisations may come under pressure. Furthermore, an uptick in Chinaâs steel inventory is a cause of concern, which could limit export opportunities for Indian players,â said Edelweiss assistant vice-president (research) Amit Dixit in a research report.