Mumbai, August 1 (IANS): Essar Steel is planning to raise $2 billion through “pre-export finance” and the money will be used for early repayment of rupee debt.

Pre-export finance is the money that is lent against confirmed orders from overseas foreign buyers.

“The move to raise $2 billion will help de-risk the company’s balance sheet as the revenues of Essar Steel are dollar denominated or dollar linked and hence provides as a natural hedge for dollar debt,” Essar Steel said in a statement.

The company said it had already received necessary approvals for the plan.

In June, Essar Steel had raised $1 billion through External Commercial Borrowing (ECB) route that the company claims has resulted in an annual saving of Rs.450 crore.

“With this financing, the company would have dollarised $3 billion of its debt which will lead to significant benefits,” the statement said.

These include reduction of average interest cost from rupee linked rate to average interest rate of 8.5 percent which will result in a large interest saving of approximately Rs.1300-1500 crore annually.

Further the company will elongate the average maturity of its debt from 3.5 to 6.5 years.

“We are continuing with our strategy to dollarise our balance sheet, bring down interest cost and elongate maturity of our debt in line with our peers,” said Ashutosh Agarwala, chief financial officer of Essar Steel India.