Essar Steel is undertaking a comprehensive business restructuring exercise. This exercise, sources say, is aimed at making Essar Steel resilient to face future downturns.

Essar Steel has appointed KPMG to undertake a study, which would cover the entire gamut of its operations including manufacturing, product mix, marketing, logistics procurement and finance.

According to sources, as a part of the exercise KPMG has also made a presentation to financial institutions (FIs) to garner their support. FI officials while confirming that a presentation had been made, declined to give any further comments. It is also believed that KPMG is conducting a study to know if there is further scope for financial restructuring.

This decision by Essar Steel has been prompted by the continued recession in the steel market and the economy at large. The company expects the gloomy situation to continue, though officials said that they plan to restructure the overall operations in such a way that Essar can service its interest and depreciation in the worst-case scenario.

Analysts say Essar Steel is one of the low cost steel producers and a viable unit, even in the current depressed market conditions. Business restructuring would not only strengthen the operations but also help Essar generate adequate cash flows on a sustainable basis to meet all its financial obligations and service its equity.