JSW Steel well placed to participate in India growth story: Jt MD & CEO

JSW Steel Jt MD & CEO Jayant Acharya, says India's growth story is playing out and the company may reach its goal of 50 mt capacity ahead of the timeline

JSW Steel’s performance in Q2FY24 exceeded expectations with a net profit of Rs 2,760 crore. Jayant Acharya, joint managing director and chief executive officer of JSW Steel, in an audio interview with Ishita Ayan Dutt, says India’s growth story is playing out and the company may reach its goal of 50 million tonnes (mt) capacity ahead of the timeline. Edited excerpts:

Strong domestic demand and lower coking coal costs were reflected in JSW Steel’s Q2FY24 performance. What is the outlook for the next two quarters?

Volumes in Q2 were driven by domestic demand and improvement in both product and sales mix -- the share of value added in total sales was 62 per cent. We liquidated inventories of 300,000 tonnes, which we had added in Q1, in a traditionally weak quarter. We see this strong momentum to continue.

In the first half (H1FY24), steel demand in India grew by 14.8 per cent to 64 mt. We expect that incrementally India would be adding 10-12 mt this year. JSW Steel is well placed to participate in the India growth story.

You are adding about 8 mt capacity by FY25. Exports are normally factored into the expansion plan. Will the slowdown in global markets and curbs in the form of the EU carbon border tax impact any of those plans?

Demand growth of 10-12 mt this year will take total consumption to 130-132 mt in India. If steel demand in India grows by 10 per cent, 13 mt will be the demand next year. So capacity addition is essential to meet India’s domestic demand.

Growth rates in Japan, South Korea, and China were in high double digits during their nation-building phase for almost two decades. That is something you will see playing out in India.

You are looking at acquisitions. Is it likely that you will achieve 50 mt capacity ahead of your targeted timeline of 2030-2031?

Yes, we are planning. But the world is a diverse place, geopolitically we need to see how things pan out. We will complete our brownfield expansion and with that, we will be able to cross 50 mt (capacity).

JSW Steel was keen on Vedanta’s iron ore assets. Are you now exploring acquiring the ESL steel plant, as well?

It’s too early to say anything. We are relatively keen on iron ore assets as compared to steel assets. We already have various steel facilities across the country, including in the east. We will look at what is finally available and then take a view.

What is the status of the NMDC divestment process for which you submitted an expression of interest?

The due diligence phase is still on. We are awaiting the next steps. Once the full numbers are ready, we will be able to take a view if it makes strategic and economic sense to look at the asset.

Are you still in the fray for Canada’s Teck Resources?

We continue to look at international assets for coking coal, in addition to the domestic coking coal assets which we have acquired. Internationally, Canada is one of the areas where Teck Resources is one of the miners with which we have engaged. But there is nothing concrete to let you know. We are also looking at other parts of the world to engage in any good quality coking coal which we can blend in our coking coal in India.

JSW Steel is linked to acquisition opportunities in steel and raw materials. How do you plan to fund acquisitions given that you have a huge brownfield expansion already lined up?

Our brownfield expansions are at a low specific investment cost. That’s why we are focusing on them to add capacity at lower costs. That will continue.

Our investments which are already built in our debt will start yielding results from the end of FY24. Therefore, in the next year, they will start giving Ebitda, which will play back into future expansion. From that perspective, most of our expansion is funded from internal accruals and some debt.

In terms of backward integration, we would certainly continue to focus on iron ore mines in India and coking coal mines in India and the international market. We have structures in place, financial relationships with domestic and international banks, and will be able to manage our financing perspectives well. We don’t see that as a concern. We are generating very strong healthy cash flows.

Where do you see debt in FY24?

We closed Q2 with a net debt of Rs 69,195 crore. Our effort will be to see that it doesn’t go up or we improve on this number going forward, even though we are finishing capex at Vijaynagar (Karnataka) and Bhushan Power & Steel. Debt was added primarily by the merger of JISPL (JSW Ispat Special Products) but in spite of that net debt-to-Ebitda was 2.52x (in Q2), which was lower than 3.14x in Q1. Our net debt-to-Ebitda remains our focus area while we expand.