JSW Steel, the country’s third largest steel-maker, is aspiring for occupying the second slot. The company is focusing on consolidating captive raw material resources as input prices continue to surge at a frenetic pace. Sajjan Jindal spoke to Ishita Ayan Dutt on the company’s current acquisition target, United Coal, and its future plans. Excerpts:
Would you update on your global plans?
We already have iron ore mines in Chile and are, therefore, concentrating on other minerals. We have evinced interest in US-based United Coal Company as it operates a coking coal mine with a capacity of 6 million tonnes, which can be expanded to 10 million tonnes. Our licence in Mozambique will take time.
What kind of valuation do you envisage for United Coal?
Mining assets have immense value now and the valuation for United Coal would be $1.5 billion.
Do you have to go through a bidding process?
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We have to go through a bidding process. There are seven bidders, including us.
Can you bring the coal to India?
If the bid materialises, we can transport the coal to India till we can mine coal from Mozambique. We can also sell the coal in the US since there is a huge demand there.
The group has diversified into several sectors in the last few years. Do you see further diversification?
In the last couple of years, we have set up new business initiatives in cement, infrastructure, energy, power and aluminium, but none of these is an unrelated business. We have a target of investing Rs 80,000 crore by 2012 and will have revenues of $20 billion. We will exceed our target.
A further diversification will come in the field of nuclear power. After the government signs the nuclear agreement with the USA, we will look at entering the sector through JSW Energy.
What targets have you set for raw material security?
We want to secure 50 per cent of coking coal and 75 per cent of iron ore from our captive sources by 2011-’12, when we will have a 16-million tonne steel-making capacity, which will include 10 million tonnes in Vijaynagar, 3 million tonnes in Salem and another 3 million tonnes in West Bengal.
What will be JSW’s steel-making capacity in the medium to long term?
By 2011-’12, we will have 16 million tonnes, which will make us the second largest producer after SAIL in India. By 2020, the capacity will rise to 32 million tonnes.
Will you pursue inorganic growth in steel as in raw materials?
Our strategy is to grow inorganically in raw materials and create greenfield capacities in India. We want to establish raw material security for our steel plants. We have been allocated iron ore and coal in Jharkhand.
Why are domestic steel companies increasingly looking to acquire raw material assets outside India?
Our mining policy treats traders and actual users of raw materials at par. No preference is given to the industry. Traders do not want to enter into long-term agreements and the steel industry needs to make huge investments for their projects. For a 10-million tonne steel plant, we have to invest Rs 50,000 crore.
Then we have inter-state problems. Despite these problems, the iron ore export is being allowed. Hence, steel companies are eyeing raw materials abroad. Raw material linkages make it easy to finance projects. For instance, in West Bengal, we have coal, at least one of the key raw materials, and we have achieved financial closure for the first phase of the project.
How will the investments be funded?
The projects will be funded through a mix of debt and equity. Around Rs 35,000 crore will be met through internal accruals and the balance through debt. The debt will be partly in rupee and partly in dollar and euro since 40-50 per cent of the products will be exported.