Product details

The case examines the financial crisis faced by Essar Steel (Essar), the leading Indian sponge iron manufacturer and the flagship company of the Essar Group, during the late-1990s and the early 21 century. It discusses how the company issued floating rate notes (FRNs) in the mid-1990s to finance its Hazira HRC plant and examines in detail the reasons why it defaulted in repaying the FRN holders on the maturity date. The case critically analyses the measures taken by the company to come out of its financial problems, the role of the Financial Institutions and the promoters. The case is structured to enable students to: (1) understand the concept of FRNs and discuss the suitability of FRNs in the capital structure of a long- term project; (2) understand the implication of poor financial management and improper project planning on a company''s financial performance, its viability, reputation and ability to redeem obligations; (3) gain insight into capital structure decisions in large and long gestation projects subject to cyclical fluctuations with international dimensions involving foreign borrowings; (4) study the debt restructuring initiatives taken to ensure proper asset liability management and timely repayment of debts. The case is aimed at the MBA/PGDBA students as part of the finance, accounting and control curriculum. The teaching note does not contain an analysis of the case.