The India units of Liberty Steel, whose global operations are facing a financial crunch after its lead bank filed for insolvency, have been shut prompting speculation that the step was taken to conserve cash.
A spokesperson however clarified that the shut down was not related to the challenges faced by Liberty Steel in other geographies. “It is a scheduled maintenance for which the plant has been shut,” the spokesperson said.
Liberty Steel, owned by Indian origin entrepreneur Sanjeev Gupta, had last year acquired Adhunik Metaliks and Zion Steel, both of which had been submitted to the insolvency courts by their lenders. The acquisitions helped Gupta gain a presence in the Indian steel market.
While Adhunik has a capacity to make half a million ton of steel a year, Zion can churn out 4 lakh tons a year. Both the units are located in Sundergarh, Odisha.
The shut down comes even as Liberty Steel’s units in the UK paused production in some of its plants. The Guardian reported that 660 employees of Liberty’s unit in Rotherham may not return to work before April 14. A spokesperson of GFG Alliance, Liberty’s parent, confirmed some units would be “operating intermittently,” the report added.
The GFG Alliance operates in over a dozen countries across the world and employs more than 30,000 people. Since March 8, when its main lender Greensill Capital filed for insolvency, the company has been looking for alternate source of funds.
“Our operations are running as normal and our core businesses continue to benefit from strong market conditions generating robust sales and cash flows,” Liberty Steel spokesperson added to the earlier comments made to Moneycontrol.
“Our operational efficiency programme has improved profitability and we are making progress in our discussions with financial institutions that can help diversify our funding. We are keeping our employees up to date and will provide further updates as we deliver our plans,” the executive said.
Even as the hunt for refinancing continues, suppliers of Liberty Steel seem to have become more cautious. Bloomberg reported that ArcelorMittal, the world’s largest steelmaker, has tightened payment terms with a South Africa based unit of GFG Alliance. The ArcelorMittal unit supplied steel to the GFG plant.
Back in India, Liberty Steel had planned to double capacity of Adhunik Metaliks, which had re-started production in 2020. It is not clear yet if the plants have been impacted.
Earlier this year, the state government of Andhra Pradesh had chosen Liberty Steel as its partner to build a steel plant in Kadapa district. A land parcel of over 3,000 acres have been earmarked for the project. While the plant is supposed to have a capacity of 3 million tons a year, the state government has also tied up with NMDC to source iron ore, the crucial raw material in steel making.