With its international operations getting streamlined or in some cases seeing a turnaround, JSW Steel, India’s third- largest steelmaker, has revived its plans to list on the London Stock Exchange.
The company is considering putting its overseas coal and iron ore assets into a single unit and then opt for a share sale, the proceeds from which will be used to fund its expansion. The process is still at its initial stages and is expected to happen in a year’s time. However, the quantum of funds to be raised via the listing is still not finalised.
When asked about the possibility of listing within a year, Sajjan Jindal, vice-chairman and managing director, JSW Steel, told Business Standard, “Hopefully yes, that’s what the plan is”. Jindal said the listing would happen only after the overseas mining operations have attained a little bit of scale. He said, “First, we are building the whole thing (mining assets), then only will look at the listing. It is being planned but only after we have developed little bit of scale in mining, then we will do it”.
The mining assets of JSW Steel, the Chile iron-ore mines, the US coking-coal mines and the Mozambique iron-ore exploration licences, will be consolidated in its Netherlands subsidiary, JSW Netherlands, and will be listed on the London Stock Exchange.
The company, in 2008, had planned to bring its international mining businesses into its Dutch unit, JSW Netherlands, which would then be listed on the London Stock Exchange. However, due to the unfavourable global economic conditions, JSW was forced to shelve the plans for a later date. The company will be starting shipments from its iron-ore mines in Chile in April. Jindal said, “From Chile, the first shipment will begin this month or next.”
However, JSW Steel doesn’t plan to get the iron ore to feed its steel plants in India but is looking to sell it in the local market in South America. As far as the coking coal mines in the US goes, the company is looking to dispatch the first shipment in the first quarter of the next financial year.
Seshagiri Rao, joint managing director and group CFO, JSW Steel said, “The coking coal from the US mines will be used at JSW’s Vijayanagar plant from the second quarter onwards. Quantities will be in the range of 70,000 tonnes per month.”
He said the company plans to ship 1 million tonnes of coking coal in the first year and take it up to 3 million tonnes by the end of third year.
The company’s coal mines in Mozambique have 80 per cent reserves of thermal coal, which is used in power generation and the rest being coking coal. The company will continue to explore more and will use the 20 per cent coking coal for its steel plants.
From Vedanta, Essar to now JSW, Indian resources companies increasingly are looking at listing overseas. Even Videocon was exploring a Houston or Calgary listing of its upstream oil and gas business.
The reasons vary, from better valuation, to roping in more sophisticated and specialised investors to an international exposure. Explaining the rationale, Rakesh Arora, managing director and head of Research, Macquarie Capital Securities (India) Pvt Ltd, said, “Expectations of a better valuation and the fact that Indian investors are not too exposed to mining stocks are reasons for Indian companies exploring overseas listings.”
“Its a combination of financial market (London Stock Exchange) and the metal market (London Metal Exchange) at the same place and capital availability that makes it favourable for mining stocks to get listed over there,” said Prasad Baji, senior vice-president, Edelweiss.
Incidentally, JP Morgan — company responsible for Essar’s successful London listing — is among the favourites with Indian promoters for such listings in London. JP Morgan also advised JSW during the local listing of JSW Energy along with other investment bankers.
