 "Newly-listed Jindal Stainless (Hisar) aims to close FY16 at 12% EBITDA margin")
Newly-listed Jindal Stainless (Hisar) is aiming to close 2015-16 (Apr-Mar) at 12 percent earnings before interest tax depreciation and amortisation (EBITDA) margin by focussing on strong-margin yielding value added products which will also allow the company to overcome the disadvantage it draws from high logistical costs.
"The Hisar plant being land locked is high on logistical cost and hence the thrust is on cold-rolled value added products in order to mitigate this cost," Ankur Agrawal, chief financial officer told Business Standard today.
Jindal Stainless (Hisar) has earned a 12 percent margin in the first half of the current financial year, up from about 9.6 percent clocked for entire FY15 and much lower than the 16 percent margin it witnessed in FY11.
Agrawal was speaking on the sidelines of the 'bell ringing' ceremony held here. Begining today, Jindal Stainless (Hisar) has started trading on the NSE and Bombay Stock Exchange. Shares of the company were trading at Rs 37 on the BSE.
Cold-rolled stainless steel forms about 80 percent of the total stainless steel consumption in the domestic market. Currently, Jindal Stainless (Hisar) has a cold rolling capacity of 2.75 lakh tonne which it plans to enhance by 45 percent over next 2-3 years. However, the company has no plans to invest in lowering of logistical costs at the moment.
"Currently there are no plans to lower logistical costs, we are only looking to increase capacity and will be investing 150-200 crore via internal accruals. Due to capital constraints, it is not possible to focus on investing in building logistics as of now. We don't want to expand irrationally," explained Agrawal.
As on December 31, the company has a net debt of Rs 3,400 crore. "With the current debt level, Hisar can sustain and plus over a period repayment will happen. We don't plan to add any more loan burden on the balance sheet for sometime, since steel industry is also in a downturn phase," he said.
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While the domestic stainless steel industry is running at an average 48-50 percent capacity utilization, Jindal Stainless (Hisar) is running its plant at 95 percent capacity utilization.
Apart from value added products such as coin blanks and razor blades, Jindal Stainless (Hisar) is also looking at the defense segment for increasing its revenue basket in coming quarters.
"Currently, we are at a very nascent stage in this defense segment and no orders with us as of now. Product application is at trial stage and this will take some time," he said.
Of the total revenue, about 85 percent will come from domestic market and balance from exports, said the management.
For any stainless steel producer, nickel and steel scrap are the two major raw material input costs for the company. Jindal Stainless (Hisar) has already made representation to the government to get the 2.5 percent import duty on imported nickel lowered to nil.
Nickel is a base metal which is not domestically produced and domestic stainless steel industry relies completely on imports of this metal.
Jindal Stainless (Hisar) will be detailing its third quarter results on February 1.
Last year, Jindal Stainless Limited (JSL) kicked-off financial re-engineering exercise by distributing Rs 8,580-crore debt among its four firms, a move aimed to reduce interest costs. It also redistributed assets among three entities to leverage idle capacity as well as streamline operations and optimise production. Following the restructuring exercise, Jindal Stainless (Hisar) has been listed and Jindal Stainless' shareholders will be issued shares by the former on 1:1 ratio basis.