SAIL refuses dividend to government, may put budget targets at risk

SAIL refuses dividend to government, may put budget targets at risk
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New Delhi, Aug 31: State-owned Steel Authority of India Ltd (SAIL) has declined a government call for a dividend this year, saying it did not have “any cash and bank balance” and that its debt-to-income ratio was much higher than agreed with some lenders, showed an internal company document.
SAIL’s refusal could make it harder for the government to meet its budgeted target of raising Rs 1.06 lakh crore from the dividends and profit of state-owned companies this fiscal year ending March. Last fiscal year, the government received Rs 123 crore, 13 per cent below the then target.
India’s second-biggest steel firm by current production said it was due to pay out Rs 2,171 crore including tax to the government based on its “net-worth” last fiscal year.
“SAIL does not have any cash and bank balance and would need to borrow from the market for payment of dividend,” SAIL said in an explanation sent to the government expressing its inability to pay the 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 steel industry.”
A SAIL spokesman told Reuters that the firm posted a loss in the 2017-18 fiscal year “so there is no chance of a dividend”.
The Ministry of Finance did not respond to a request for comment.
The document also showed SAIL’s net debt-to-earnings before interest, taxes, depreciation and amortization (EBITDA) ratio was 8.5, against the 1.5 to 3.75 “the company in financial covenants agreed to with some of the foreign lenders”.
The firm has Rs 3,220 crore debt due for repayment this fiscal year, which will have to be “met from borrowed funds”.
“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 net profit in toto,” the spokesman said.