 "Can Sajjan Jindal digest Tata Steel UK assets?")
Steel tycoons have a fetish for lavish weddings. Lakshmi Niwas Mittal got his daughter married in one of the most expensive weddings of the time at the Palace of Versailles, in 2004; Pramod Mittal reportedly spent Rs 500 crore for his daughter's wedding at Barcelona in 2013; the latest to make it to the list is Sajjan Jindal who got his son, Parth, married at Vienna last week.
Opulence, glitz and glamour: the Jindal wedding had all the makings of a Bollywood extravaganza. The rich and the powerful were all there, from Lakshmi Mittal to the Ambanis. The venues in Austria -Hofburg Imperial Palace, Liechtenstein Palace, Art for Art, Belvedere Palace - were iconic. And the icing on the cake was a performance by Enrique Iglesias.
In Mumbai circles, Jindal had last made news in 2012 when he bought a Rs 500-crore bungalow to make a seven-storey family home. Jindal's present house at Walkeshwar facing the Arabian Sea is equally palatial, though he prefers not to talk about his houses in Mumbai.
The glitz is a sign of arrival: from a plant of just one million tonne to being India's largest private sector steel producer with a capacity of 18 million tonnes, through organic growth as well as acquisitions, Jindal has come a long way in just about two decades.
Last week, in the middle of the celebrations in Vienna, news broke that JSW Steel was one of the seven bidders for Tata Steel's UK assets. The company statement read: as part of its growth strategy, the company evaluates several opportunities including the current opportunity of UK steel facilities. It is premature to add any further at this stage.
The party at Vienna continued but investment analysts started to get worried: won't this cause JSW Steel's debt to spiral?
At the end of September 2015, JSW's total debt was at Rs 37,364 crore, up from Rs 21,346 crore in FY13; interest outgo at the end of March 31, 2015 stood at Rs 3,493 crore.
Adverse climate
In February, ICRA downgraded JSW Steel by a notch and changed the outlook to negative on the back of a significant drop in steel prices due to downturn in the global industry and unabated imports at predatory prices.
"No large extraordinary cap-ex or investment was planned earlier for the next one or two years beyond the normal. In that context, the potential bid may affect the company's liquidity and capital structure," says ICRA Senior Vice-president Jayanta Roy. "But it would also have to be seen what this acquisition, if it materialises, would mean for cash flows and whether it would be adequate to service incremental debt."
The steel market has recovered to an extent since the downgrade, though. The minimum import price imposed by the government has restored domestic prices; globally too prices have moved up by around $250 a tonne, or 91 per cent, in the past three months.
Yet the question doing the rounds is, how Jindal could possibly make the acquisition work given that Tata Steel has been losing a million pounds a day on these assets.
Akash Gupta, associate director, Fitch Ratings' Corporate Group in Singapore, says JSW Steel's net leverage will jump to above six times in FY16, compared to 4.5 times in FY15, indicating a relatively weak financial profile. "We expect gradual improvement in credit metrics, subject to risk of any material debt-funded expansion or acquisition. However, it is a bit early to comment specifically on the potential bid."
The dark horse of steel
Then there are those who feel Jindal can pull off the acquisition. "JSW Steel has the financial muscle and credibility to take these calls," says Ankit Miglani of Uttam Galva Steels group which is a customer of the company.
A Prabhudas Lilladher report after the third quarter results, too, said: current performance underscores our view that JSW Steel would be relatively better off in the existing environment due to improved domestic iron ore supplies, rich product-mix and highly competitive operations.
What makes Jindal a credible investor is that he has a proven track record of succeeding where others have failed.
In the mid-1990s, the Narasimha Rao government auctioned the Vijayanagar Steel Plant, which was a non-starter, to Jindal and Mukand. The plant had about 6,000 acres. Jindal's share stood at around 3,700 acres. Jindal's Vijayanagar plant, then under Jindal Vijayangar Steel, is now India's largest single-location plant at 12 million tonnes, and gearing up to produce 16 million tonnes.
An old timer remembers Jindal as a shy 26-year-old when he got involved with the Vijayanagar plant with older brother Prithvi Raj Jindal in tow. "He was a very good engineer," he recalls.
The plant had no captive raw material resources. "He overcame the iron ore issue through adaptation of beneficiation of rejected iron ore fines. Non-availability of coking coal was tackled by introduction of Corex technology. The twin initiatives were revolutionary for steelmaking in India," says a JSW Steel executive. "It gave a different meaning to innovation and tackling challenges. Jindal saw opportunities in challenges."
Somewhere in the late 1990s, Jindal Vijayanagar Steel (merged with Jindal Iron and Steel Company in 2005 to form JSW) was under corporate debt restructuring as were Essar Steel, Lloys Steel Industries and Ispat Industries. A decade later, it's Jindal who stands tall among the rest.
"It's difficult to beat someone whose sole interest is doing business," a former JSW Steel official says.
Having achieved success in steel, Jindal is now trying to do a repeat in cement and energy where he is eyeing a slot among the top three in the country.
Family matters
Paradoxical as it may sound, many say Jindal is a businessman who has his heart in the right place.
In 2007, he had bailed out Prithvi Raj when he bought a 90 per cent stake in his plate mill, double jointing and coating unit and a pipe mill in the US for an enterprise value of $900 million.
More recently, JSW Energy has agreed to buy younger brother, Naveen's 1,000MW power plant for an enterprise value of Rs 4,000 crore: Rs 6,500 crore if it secures fuel and power purchase agreements.
Jindal has gone off the beaten track otherwise as well. The most inconceivable was at the peak of the agitation in Singur against Tata Motors' Nano project by "unwilling" land losers led by Mamata Banerjee (then in the Opposition).
Responding to queries on what he would have done had he been the chief minister of West Bengal, Jindal had said, he would have compensated unwilling farmers with double the land, 800 acres, next door in return for land for the Tata Motors factory at Singur.
"I am a farmer's son. I understand their sentiment," he had famously said.
He followed up on that when he handed out an exemplary package that included free shares in his project to land losers at Salboni in West Medinipur, West Bengal.
Again, when the project was put on the backburner, he offered to return the land free of cost. "He is an outstanding entrepreneur," a once-upon-a-time close associate rationalises.
Maya Angelou had said: the desire to reach for the stars is ambitious. The desire to reach hearts is wise. Jindal understands the importance of striking a balance between the two.
