JSW Steel plans to complete construction of its new plants - 5 million tonne (MT) in Dolvi, Maharashtra and 1 MT in Vijayanagar, Karnataka, which was dealyed due to shortage of workers during the lockdown, in the first half of 2022, the company's joint managing director and group chief financial officer Seshagiri Rao said.
JSW Steel is targeting to achieve 29 MT production capacity with the completion of the greenfield capacities and acquisition of Bhushan Power and Steel (BPSL).
The company had offered about Rs 19,700 crore for the acquisition of BPSL, but the matter is before the Supreme Court as the Enforcement Directorate (ED) wanted to attach the assets of bankrupt firm in an alleged money laundering case against the old management.
The steelmaker is also planning to complete the downstream capacity expansion to 11 MT from 5 MT along with the Dolvi and Vijayanagar capacity construction. The company has 12 MT and 5 MT capacity in Vijayanagar and Dolvi, respectively. It also has a 1 MT plant in Salem.
"We are also continuing captive iron ore integration with the steel plants as it will reduce costs of production. The other cost reduction projects like pallet plant, coke oven batteries, power plants will be commissioned in this year," said Rao.
JSW Steel will commence brown field expansion of JSW Ispat and BPSL once these projects are completed. Ispat, which JSW acquired through bankruptcy proceedings, has turned around with net profit of Rs 29 crore in third quarter. With the completion of acquisition of BPSL, JSW will have 28-29 MT capacity in India, said Rao.
The acquisition of BPSL will increase the debt of JSW Steel which stood at Rs 51,793 crore as on December 31. "However, once the acquisition is done, there will be incremental EBITDA from the company. The 6 MT capacity expansion at Dolvi and Vijayanagar will also increase the EBITDA. Of the Rs 52,000 crore debt of JSW Steel, Rs 16,000 crore was spent for expansion, which are yet to come on stream. The new capacities will start generating EBITDA from first half of 2022," said Rao.
The larger product mix, lower cost of production and higher volume are expected to give upside for JSW Steel in the next year.
The company has been investing in carbon neutrality projects at its plants. It has planted 2 million trees for forest cover. Reduced fossil fuel dependency, lower carbon emission, emphasis on renewable power and reduced fresh water consumption are the major sustainability targets of the company.
JSW Steel reported a manifold jump in its consolidated net profit to Rs 2,669 crore for the December 2020 quarter. The private sector steel maker had clocked a net profit of Rs 187 crore in the corresponding quarter of the previous financial year. Consolidated income rose to Rs 22,006 crore as compared with Rs 18,182 crore in the year-ago period. Total expenses stood at Rs 18,120 crore as against Rs 17,719 crore a year ago.
Rao said iron ore supply from captive sources has improved in the third quarter. "Capacity utilisation improved, fixed costs came down, export has reduced to 12 per cent of overall sales from 28 per cent...Moreover, the domestic steel demand picked to 10.28 MT in December from 1 MT in April," he added.
The demand from auto sector was robust. JSW Steel's sales in the auto sector went up by 30 per cent quarter-on-quarter (QoQ) and 57 per cent year-on-year (YoY). Retail steel sales rose by 14 per cent YoY, 35 per cent QoQ because of rural demand.
According to Rao, there is enough liquidity in the system to boost infrastructure activities in the coming days. "Globally, there is steel demand because of liquidity and government expenditure. The global steel demand is expected to go up by 4 per cent in this calendar year. The domestic steel demand will be at least 10 per cent up for the next financial year. In this year, it is expected to be 7-8 per cent negative growth," he said.