JSW Steel Q4 net profit down 20%; announces JISPL merger with itself

Revenue up 74 per cent YoY to Rs 46,895 crore as company says its opportunities for exports are expanding.

JSW Steel reported on Friday a consolidated net profit of Rs 3,343 crore for the quarter ended March, down 20.23 per cent from the year-ago period on higher raw material cost, lower net sales realisation and an impairment provision. The company’s net profit a year back had stood at Rs 4,191 crore.

JSW recorded an exceptional loss of Rs 741 crore in the quarter, as a subsidiary in the US received a final arbitration order on its dispute with the lessors of a coking coal mining lease and plant lease and a consequential notice of termination of lease. The company recorded an impairment provision of Rs 710 crore.

While profit fell, JSW’s revenue from operations was the highest ever, up 74 per cent year-on-year (YoY) to Rs 46,895 crore on higher capacity utilization and additional production from Dolvi Phase II expansion.

As per Bloomberg estimate, the company’s revenues were expected at Rs 43,883 crore and adjusted net income at Rs 4,558 crore.

For the financial year FY22, the company reported its highest ever crude steel production, saleable steel sales, revenue from operations and net profit.

Revenue from operations for the year ended March stood at Rs 146,371 crore, up 83 per cent YoY, while net profit was at Rs 20,938 crore, up 166 per cent YoY.

The share of exports in JSW’s sales was at 28 per cent in FY22, while export volumes grew 8 per cent. The company said global supply chains will continue to provide opportunities for exports.

The outlook for auto sales, especially PVs and M&HCV was healthy, JSW said while the real estate market remained strong despite rising interest rates.

JSW also said that high inflation, energy costs, and rate hikes by the RBI and global central banks will be dampeners to growth.

For FY23, the company’s guidance for crude steel from consolidated Indian operations including joint control companies is 24.30 mt; total combined crude steel volumes including JSW Steel USA would be 25 mt.

JISPL merger

Four years after JSW Steel acquired Monnet Ispat & Energy (now JSW Ispat Special Products – JISPL) jointly with AION under the insolvency, it is set to be merged into JSW Steel.

According to the contours of the scheme of amalgamation, JISPL and its holding company Creixent Special Steels (CSSL) are proposed to be merged into JSW Steel. CSSL is a joint venture between JSW Steel and AION Investments Private II Limited.

The scheme of amalgamation was approved at the companies’ respective board meetings on Friday and is subject to shareholders, creditors and regulatory approvals including from the Sebi and the stock exchanges.

The proposed swap ratio is like this: JISPL shareholders will receive 1 share of JSW Steel for every 21 shares of JISPL; shareholders of Creixent will receive 3 shares of JSW Steel for every 2 shares of Creixent.

And JSW Steel’s shareholding in Creixent will be extinguished upon the scheme becoming effective.

Post-transaction, JISPL public shareholders will hold 0.4 per cent in JSW Steel and AION 0.7 per cent.

“The amalgamation will not only increase efficiencies and enhance administrative control but will also create and enhance stakeholders’ value by unlocking the intrinsic value and growth potential for the respective businesses of JISPL, CSSL and JSW Steel,” said Seshagiri Rao, joint managing director & group CFO, JSW Steel.

“When we acquired Monnet Ispat & Energy as a distressed entity in 2018 with AION as our partner, our aim was to turn the company around and metamorphosize it into a sustainable business on its own before merging it with JSW Steel. Now that the company is profitable and thriving, we believe this is the right time to bring it into the fold of JSW Steel and leverage the synergistic benefits of the combined entity,” he said.

JISPL is a special steel products manufacturer having a crude steel manufacturing capacity of 1.2 MTPA at its integrated steel plant in Raigarh and its plant at Raipur.

In FY21-22, JISPL had revenues of Rs 6,060.65 crore and net profit of Rs 9.18 crore.