Concerned over uncertain market conditions, JSW Steel has decided to reduce its capex target for 2020-21 by about 45 per cent to Rs 9,000 crore against its earlier plan of spending Rs 16,340 crore.
At 9,000 crore, the capex target is about 12 per cent lower compared to the company's Rs 10,200-crore spend during 2019-20.
In the company's annual report, JSW Steel CMD Sajjan Jindal said the company has undertaken a detailed exercise to prioritise all planned and discretionary spends.
The objective is to conserve liquidity, ensure that strategic projects which are in advanced stages of completion are commissioned on priority basis, he said.
Due to the lockdown and its subsequent extensions, project activity at various sites were severely constrained by the non-availability of required manpower and material. The company has thus reduced planned capex on all projects. Its total planned capex for 2020-21 stands at about Rs 9,000 crore, Jindal said in the report.
The economic impact caused by pandemic has not only affected the new fiscal year's production target of the company but has also led to uncertainty in terms of availability of manpower, expertise to continue capacity expansion projects, the report added.
"JSW Steel is cognisant of the risks that may impact its capital expenditure plans and has decided to recalibrate its capex plan for FY21. It now plans to spend 8,200 crore on project capex and another Rs 800 crore to operationalise seven mines acquired through auctions in Karnataka and Odisha, versus the earlier capex guidance of Rs 16,340 crore," the annual report for 2019-20 said.
On the market conditions, the company said the World Steel Association has also lowered its forecast for steel demand for calendar year 2020.
The global demand is expected to contract by 6.4 per cent to 1,654 million tonne due to COVID impact.
In 2019-20, JSW Steel said it emerged as preferred bidder for four iron ore mines in Odisha and three mines in Karnataka.
Out of the Rs 9,000, the company would utilise Rs 800 crore to make these mines operational at the earliest in 2020. The investment will be made to develop infrastructure facilities and optimise logistics cost of transporting iron ore from mines to steel manufacturing units. This will significantly strengthen the company's ability to preserve margins.
JSW Steel said Dolvi Works is expanding the capacity by 5 MTPA to 10 MTPA along with a captive power plant and coke oven plant.
The company is also expecting to commission an 8 MTPA pellet plant and wire rod mill at its Vijaynagar facility by mid of the current fiscal.
The downstream modernisation and capacity enhancement projects in Vasind and Tarapur and colour coating plant at Kalmeshwar are expected to be commissioned in the second half of FY 2020-21.