Hit by the COVID-19 pandemic, Sajjan Jindal-led JSW Steel has slashed its capex plans for 2020-21 by almost 45 per cent to Rs 9,000 crore.
The company had initially earmarked Rs 16,340 crore as capex for FY21.
"...the total planned capex spend for FY2021 is revised to about Rs 9,000 crores (from the earlier guidance of Rs 16,340 crores)," JSW Steel said in a statement.
"The company has undertaken a detailed exercise to prioritise all planned and discretionary spends with a twin objective of conserving liquidity, and to ensure that key ongoing strategic projects which are in advanced stages of completion are completed and commissioned on priority - so that the benefits and cash flows from these projects can accrue sooner," it added.
Of this Rs 9,000 crore capex, JSW Steel has earmarked Rs 8,200 crore for existing capacity expansion plans, while the rest Rs 800 crore is towards various payments to operationalise over seven iron ore mines in Karnataka and Odisha where the company emerged as the preferred bidder in auction.
According to the company, the Rs 800 crore capex plan excludes Rs1,200 crore towards upfront payment that will be set-off or recovered from the premium payment to be made for iron ore that will be extracted from these mines.
In October last year, the company had revised down the planned capex spend for FY2020 to Rs11,000 crore from Rs15,700 crore announced in May 2019, while the actual cash spend for FY2020 stood at about Rs 10,200 crore.
"Due to the lockdown announced by the government, and its subsequent extensions to contain the spread of COVID-19, project activity at various sites were severely constrained due to a slew of restrictions. All sites are impacted due to non-availability of required manpower and material due to restrictions on movement," it added.
While the company is ramping up capacity utilisation, domestic demand outlook is expected to remain subdued in the near term as a vast majority of customers across automotive, construction, engineering and capital goods will take time to resume operations and increase activity levels.
"Consequently, the company initially intends to focus more on the export markets in order to improve utilization, defray fixed costs over a higher base, generate cash flows and liquidate stocks," it said.
The company said that at Dolvi (Maharashtra), requisite permission to restart project activities was received towards the end of April and resource mobilization started thereafter.
"However, with a number of workers employed by our contractors beginning to go back to their homes, with low visibility of when this trend is likely to reverse, there is an imminent challenge.
"Further, the non-availability of foreign experts, from our technology and equipment suppliers, due to international travel restrictions is also impacting the commissioning schedule. The company is working on mitigation plans to overcome these challenges," it said.
In view of this, the expansion of crude steel capacity at Dolvi works from 5 MTPA to 10 MTPA along with the captive power plant and coke oven phase 2 is likely to get delayed into the second half of FY2021.
"Also, the 8 MTPA pellet plant and the wire rod mill at Vijayanagar (Karnataka) are expected to be commissioned in Q2FY21. The CRM1 complex capacity expansion at Vijayanagar from 0.85 MTPA to 1.80 MTPA is expected to be commissioned progressively in Q2 and Q3 of FY21.
"The downstream modernisation cum-capacity enhancement projects at Vasind and Tarapur (Maharashtra) and the colour coating line at Kalmeshwar (Maharashtra) are now expected to be commissioned in the second half of FY21," it said.
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