JSW will play a very important role in consolidation, says Sajjan Jindal

Competition from competent new players will help the industry grow faster, and JSW Steel will benefit because of its head start, says Sajjan Jindal, Chairman and Managing Director of the company.
 
Edited excerpts:
 
In JSW Steel’s journey from one million tonnes to 18 million tonnes, what has been the biggest challenge?
 
At every point, there have been different challenges. First, there was technology. Then we had a global downturn, but we came out of that. Thereafter, there was a mining ban in Karnataka. That became a big challenge. So at different stages, there were different challenges. But overall, I would say that the journey has been quite smooth. It has not been a very difficult journey.

 
Why did you need to go in for corporate debt restructuring (CDR)?
 
When we were building the steel plant, the Asian currency crisis happened in 1997-98 and the steel market collapsed. We struggled to complete the project and the banking system sort of withdrew from lending further. That was the most difficult period. Because of all these things our interest cost during construction ballooned and we had to approach the CDR. In fact CDR was created at that time for two or three companies like ours — Essar, Ispat, Mukund. We were the first ones.
 
How did things change from thereon?

 
Obviously, that was a big setback for us because we had never imagined that we would be facing this kind of a situation. After that we commissioned our plant and simultaneously approached the CDR. Once we were restructured we brought about financial discipline in the company, due to which we managed to sail through the difficult phases. So we have always remained a cash-surplus company. Steel is a cyclical industry but strong fiscal discipline prepared us for the downturn. Since 2002, when we were in CDR, there have been three-four big up-and-down cycles, but we have faced this with relative ease.

 
Among the companies that were in CDR around that time, how is it that only JSW managed to come out with flying colours?
 
That is purely because of the good-quality management that we have. Our team was very committed and highly motivated. We very quickly moved into high-quality products and brought in JFE as a partner. All these things helped us to become one of the top-performing companies in the country.
 
Will JSW Steel continue to be India-focused?
 
JSW Steel is primarily India-focused but now we are also looking at acquiring some assets overseas. We have one plant in the US, but that’s a small one. We are now expanding it and also looking at investing in the US and Europe. These, however, are relatively smaller investments compared to our size. We want to be a global company but India-centric. India will account for 90-95 per cent of capacity and the balance will be the rest of the world.

 
Is that because of India’s growth potential?
 
We have a long way to go in this country, because steel consumption is not even 100 million tonnes right now. China consumes over 700 million tonnes. Maybe, we will not grow like China because it is a controlled economy, but the gap will also not be that wide. We will definitely go up to 200-250 million tonnes of steel consumption in the coming years. I am very bullish about India. Also, after this insolvency process, there will be lot of consolidation in this sector. There will not be too many large steel players. So JSW will play a very important role in consolidating this sector.

 
How do you see the potential entry of new players like Vedanta and ArcelorMittal?
 
If more competent players come into the sector, the market will grow faster than us trying to do the same thing. I would welcome new global players. We have a huge head start, so we will benefit from it.
 
Do you see yourself maintaining the leadership position?
 
We would like to retain our leadership position, and we are tough competitors.
 
Going forward, what would be the top verticals for the group?
 
Right now, we are in four businesses — steel, cement, power, infrastructure and now, we are also entering the paints industry. Our top driver is going to remain steel — that will be the mainstay of the group. We are looking at the energy sector very aggressively.

 
What percentage of the group’s revenues would steel account for in the next five years?
 
Probably 50-60 per cent.