Tata, JSW Steel plan massive capacity expansion to meet anticipated demand

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Tata, JSW Steel plan massive capacity expansion to meet anticipated demand

Beefed up by strong set of numbers for the previous quarter and rising steel prices, JSW Steel yesterday announced that it will hike up its steel capacity by 37 per cent in the next two years. Clearly, it does not intend to relinquish its position as India's largest steel maker to Tata Steel. The latter is now a strong contender for the title having recently got the NCLT's nod to acquire Bhushan Steel, barring further litigation challenges of course.

"We have decided to expand our capacity from 18 MT (million tonne) to 24.7 MT, which includes addition of one MT at Vijaynagar and 0.67 MT at Dolvi unit, and also expand our downstream projects by 2020," Seshagiri Rao, JSW Steel's joint managing director and group chief financial officer, told reporters while announcing a nearly two-fold rise in consolidated net profit (year-on-year0 to Rs 2,879 crore in the March quarter. "Looking at the domestic demand growth, we see a shortage of steel if we don't expand in the next two years," he added.

The Sajjan Jindal-led company had announced an overall estimated capex plan of Rs 26,815 crore last year. This is now expected to be enhanced by Rs 17,600 crore to implement new projects. "The company is now implementing a cumulative capex pipeline of Rs 44,415 crore by March 2020, of which it has already spent about Rs 4,700 crore in FY18," said Rao, adding that the projects are planned to be funded by a mix of debt of Rs 25,000 crore and internal accruals of around Rs 19,000 crore.  

According to Bloomberg, Tata Steel, which returned to green in its Q4 FY18 results, also aims to double domestic capacity to 26 million tons in five years. The company has pegged capex at around Rs 8,000 crore for the current fiscal.

The reason both steel biggies are scaling up to record levels is the anticipated jump in domestic steel consumption on the back of the government push for infrastructure projects as well as strengthening consumer demand. Rao, for one, expects steel consumption in the country to grow by 7-7.5 per cent in FY19. According to him, the domestic growth outlook is improving as structural reforms are expected to increase productivity and incentivise investments.

Going forward, JSW Steel hopes that the 17 per cent growth in the automobile industry, 14 per cent in the appliances industry and infrastructure and housing sector growth will create huge demand for domestic steel players. In order to meet that demand, Tata Steel and JSW Steel are not only expanding their respective facilities but will also keep an eye out for more beleaguered assets going under the hammer.

Currently, Tata Steel is embroiled in a legal tussle with UK's Liberty House over Bhushan Power and Steel while JSW Steel is awaiting NCLT approval for Monnet Ispat and Energy (MIEL) acquisition.

With PTI inputs

 

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