Jindal South West Steel plans Rs 10,000 cr expansion

To double capacity in five years

Jindal South West Steel (JSW), the Rs 7,000 crore steel major formerly called Jindal Vijayanagar Steel, has outlined a Rs 10,000 crore expansion plan over the next five years. This will see its capacity jump from 2.5 million tonnes to 10 million tonnes per annum in five years.

The expansion is being planned in two stages which will see the company expanding first to 7 million tonnes and then to 10 million tonnes. The company plans to use equity-linked instruments and debt to finance the expansion.

Speaking to Business Standard, Seshagiri Rao, director-finance, JSW, said: "We are in the process of expanding our current capacity of 2.5 million tonnes to 3.8 MTPA by March 2006."

JSW is the second largest steel producer in the private sector in India and is a low cost producer. The company, which had earlier raised high-cost debt is now on a debt-reducing exercise. From around a 1.2:1 debt-equity ratio it intends to take it down to 0.8:1 in the near future.

"Earlier we had raised debt at 15-16 per cent and now we have swapped them for low cost debts around 8 per cent," Rao highlighted.

JSW presently has four units under its fold, one near Bellary in Karnataka, two value addition units in Maharashtra and another plant which the company recently acquired in Tamil Nadu.

"It is our intention to expand our current facilities as we have the required bandwidth at these units. I do not think we will look at a new location for our expansions," he added.

On the dip in global steel prices and the resultant cut in production across major steel companies, Rao said: "The steel industry is highly volatile and these troughs were expected due to a slump in demand in the three major European economies, Germany, France and Italy. Surprisingly, China is not the reason for the slump."

JSW for FY05 reported a turnover of Rs 7,035 crore and a net profit of Rs 870 crore. In an effort to improve its operational efficiency, the company has implemented Oracle E-Business suite which will help them in purchasing, inventory management, project costing besides others.