MUMBAI: ESSAR Steel has paid off the entire debt of over Rs 927 crore owed to the Specified Undertaking of the Unit Trust of India (UTI). The last tranche of loans aggregating Rs 487 crore were recently repaid by the company, said a source.

According to the source, the company extinguished these loans with close to Rs 650-700 crore being generated through internal accruals with the balance being refinanced. Essar Steel is believed to have raised funds from state-owned banks including SBI to refinance these expensive loans, said the source.

An Essar Steel official, however, declined to comment on the development. The official said that the company would not discuss individual loan repayment cases. An official from SUUTI, however, confirmed that Essar Steel had paid the last tranche of Rs 487 crore. The official added that a clutch of banks were roped in to refinance the debt. The SUUTI or UTI-I as it is popularly known is vested with all, the administered schemes of the erstwhile UTI besides other assets and liabilities.

Essar Steel's debts were restructured by UTI in October '04, when it laid out a roadmap to clear all of UTI's dues of Rs 927 crore by December '05.

The restructuring involved Rs 80 crore being paid up by the company by December '04, Rs 10 crore to be paid every month there after and the balance Rs 737 crore to be paid before December '05. Essar Steel managed to pay only Rs 250 crore of the balance Rs 737 crore before December '05. The company managed to payoff the remaining Rs 487 crore recently to wipe off UTI's dues from its balance sheet.

Essar Steel has been working on reducing its finance cost for some time now. The average cost of funds of Essar Steel under the corporate debt restructuring (CDR) programme was 11.6%. The company had envisaged getting out of the CDR net by March '06. According to sources, the company has already repaid or refinanced a large part of its CDR debt.

According to sources, the company is now close to moving out of CDR. Once the company moves out of CDR, its average interest cost is expected to be pruned to an average of 8% from close to 11.6%. Company officials had earlier stated that they expect to attain a debt equity ratio of less than 1:1 in the near term