Abstract

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 21st 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 analyzes the measures taken by the company to come out of its financial problems, the role of the FIs and the promoters.

Learning Objectives

The case is structured to achieve the following Learning Objectives:

• Suitability of FRNs in the capital structure of long-term project.

Keywords

Financial crisis, Essar Steel, Essar, Indian, sponge iron, manufacturer, flagship, Essar Group, 1990s, 21st century, floating rate notes, FRN, 1990, Hazira, HRC, FRN, maturity date, financial problems, FI, promoters