Bombay Coated & Special Steels earmarks Rs 125 crore for debt repayment

Bombay Coated & Special Steels proposes to use Rs 125 crore of net initial public offering proceeds for debt repayment or prepayment in fiscal 2027. The allocation equals about 69% of the Rs 181.604 crore outstanding under seven identified facilities as of August 31, 2026, and about 41% of its Rs 302.428 crore aggregate borrowings.

How much of Bombay Coated's IPO is earmarked for debt repayment?

Bombay Coated has earmarked Rs 125 crore to repay or prepay, in full or in part, certain borrowings and accrued interest. The fresh issue is proposed to raise up to Rs 183.057 crore before issue expenses, making debt repayment the largest quantified object of the issue. The other quantified object is Rs 15.77 crore for acquiring capital equipment under lease arrangements with Siemens Financial Services Private Limited.

Bombay Coated expects to deploy the entire Rs 125 crore debt allocation in fiscal 2027. Net proceeds are the gross proceeds less issue expenses, which were not finalised in the Red Herring Prospectus. Any balance available for general corporate purposes cannot exceed 25% of gross proceeds under the Securities and Exchange Board of India Issue of Capital and Disclosure Requirements Regulations, or SEBI ICDR Regulations, and cannot repay loans from promoters or directors.

The stated deployment remains management's estimate rather than a plan appraised by a bank, financial institution or external agency. Bombay Coated has appointed a monitoring agency to submit quarterly reports on the use of net proceeds under Regulation 41 of the SEBI ICDR Regulations. The company says market conditions, interest rates, project demand, competition and financing arrangements could alter the timing or allocation.

Which Bombay Coated borrowings could be repaid with Rs 125 crore?

Bombay Coated has listed seven facilities with Rs 181.604 crore outstanding as of August 31, 2026, as candidates for repayment or prepayment. The group comprises two term loans used for capital expenditure and five working-capital facilities. The company states that it has received no-objection certificates from all the identified lenders.

Working-capital facilities represented Rs 157.409 crore, or about 87%, of the Rs 181.604 crore identified balance. The two capital-expenditure term loans accounted for Rs 24.195 crore. This split means the proposed repayment pool is predominantly linked to facilities that support working capital rather than solely to loans for plant or equipment.

Kotak Mahindra Bank is the largest lender grouping in the identified list, with Rs 63.705 crore across its term loan and working-capital facility, or about 35% of the total. DBS Bank India follows with Rs 46.741 crore across two facilities. The DBS term loan had the highest stated rate, 9.00% annually, while the HSBC working-capital facility had the lowest stated rate, 7.55% annually.

How will Bombay Coated select loans and what effect does it expect?

Bombay Coated has not committed the Rs 125 crore to particular facilities. It will approach lenders after the issue and select borrowings based on outstanding amounts, interest rates, remaining tenor, repayment schedules, lender consents, repayment restrictions, prepayment penalties and related costs. This leaves the final distribution of the allocation dependent on conditions when the issue is completed.

The identified balances can change before repayment because Bombay Coated may repay, refinance or draw further amounts under existing facilities, or obtain additional credit facilities. If a listed loan is repaid or refinanced before completion of the issue, the company may use proceeds for a refinanced or additional facility, but the debt-repayment use cannot exceed Rs 125 crore. Several working-capital facilities are renewable annually, while the two term loans have stated tenors of five years and eight years.

Bombay Coated says the repayment is intended to reduce outstanding indebtedness and debt-servicing costs, improve its debt-to-equity ratio and release internal accruals for business growth and expansion. These are management expectations, not a quantified forecast of finance-cost savings or post-issue leverage. Any reduction also depends on interest rates, loan balances at repayment and whether the company subsequently takes on replacement debt.

The Rs 125 crore allocation would not eliminate Bombay Coated's Rs 302.428 crore aggregate outstanding borrowings reported as of August 31, 2026. Separately, the company proposes Rs 15.77 crore to acquire leased equipment from Siemens, against lease and rental expenses of Rs 4.686 crore in fiscal 2026 and Rs 2.472 crore in fiscal 2025. Bombay Coated says ownership of that equipment is intended to reduce recurring lease and rental costs, but this acquisition is separate from the debt-repayment object.

What could change Bombay Coated's planned deployment?

Bombay Coated may reschedule or change its deployment if financial or market conditions, business strategy, competition, interest rates, inflation, exchange rates, project demand or costs change. If planned use in fiscal 2027 is not completed, the company says it may use the unspent amount in the next fiscal year, subject to applicable law. The prospectus describes the fiscal 2027 schedule as indicative and subject to management discretion.

If actual use for an identified object is lower than estimated, Bombay Coated may redirect the balance to general corporate purposes, provided that category remains within the 25% cap on gross proceeds. The company may also use surplus funds from one object for another object with higher requirements. However, the prospectus sets a Rs 125 crore ceiling on the amount that can be used for repayment or prepayment of borrowings.

Prepayment costs are another variable in the final deployment. The seven listed facilities show nil prepayment penalties in the prospectus table, but Bombay Coated says certain indebtedness may attract such charges. Net proceeds would fund applicable charges, while internal accruals would cover any shortfall in proceeds needed for penalties, interest or related costs.

Conclusion

Bombay Coated's proposed use of Rs 125 crore for debt repayment places borrowings ahead of its other quantified issue object, the Rs 15.77 crore acquisition of leased equipment. The planned repayment could address about 69% of the Rs 181.604 crore outstanding across seven identified facilities, although it represents only about 41% of the Rs 302.428 crore aggregate borrowings reported on August 31, 2026.

The next update is the final prospectus, which is expected to finalise issue expenses, net proceeds and the amount available for general corporate purposes. Bombay Coated also plans to approach lenders after the issue, so the facilities ultimately repaid, the costs of prepayment and the fiscal-year deployment could differ from the August 31, 2026 facility list.