JSW Steel plans to increase capacity of crude steel to 27 million tonnes by FY-2022

JSW Steel plans to increase its capacity to produce around 27 million tonnes (MT) of crude steel by financial year 2022 from about 18 MT in fiscal year 2020, said Joint Managing Director Mr Seshagiri Rao.

Mr Rao said, “We will have 23 MT of production from increased capacities over and above the 3.5 MT from completing the acquisition of Bhushan Power & Steel and 1 MT from the Monnet Ispat acquisition”.

The company will focus on normalising operations and reducing costs in 2020, so that its earnings before interest, tax, depreciation, and amortisation (EBITDA) will improve.

There has been shortage of labour because of the ongoing COVID-19 pandemic. The workforce number came down from 15,000 to 3,000 at its unit in Dolvi (Maharashtra) between March and April. Though, it has since gone up to 4,900, Mr Rao said.

“Workers want to come back. In the next two quarters, we will focus on completing pending projects and pending acquisitions,” he added.

JSW Steel plans to invest Rs 4,000 crore (US$ 567.46 million) in nearly doubling its downstream capacities, like tin plates, galvanized steel, and the colour-coated segment, to 9 MT from 5 MT currently.

“We have operationalised four mines in Odisha, six in Karnataka and we are working on operationalising three more mines in Karnataka, with a total capex of around Rs 1,250 crore (US$ 177.33 million),” he said.

He added that Dolvi and Salem (Tamil Nadu) plants will have complete raw material security, while one-third of its requirements at Vijayanagar (Karnataka) will be met from operational mines.

There was loss reported in the company’s overseas businesses in the first quarter.

“We are losing money from Ohio, the first time in the last decade…more we produce, the more we are losing. We have invested a capex of US$ 27 million for modernisation of electric arc furnace plants,” Mr Rao said.

He further added that the company is also planning to shut down its wire rod and bar mill at the Italian unit and focus on positive EBITDA-generating segments like railway mills.

JSW Steel invested US$ 1 billion in its Ohio steel mills in 2018, after acquiring the unit for an enterprise value of about US$ 182 million, including around US$ 102 million of debt.

JSW Steel reported consolidated net loss of Rs 582 crore (US$ 82.56 million), its first quarterly loss in six years, indicating the impact of the virus outbreak and the lockdown.

The company's net debt rose by 14 per cent to Rs 54,527 crore (US$ 7.74 billion) quarter on quarter, driven by Rs 1,290 crore (US$ 183 million) of upfront payment as advances, apart from a Rs 817 crore (US$ 115.90 million) capex spend during the quarter.

Its net debt to EBITDA ratio reached 5.7 times in the quarter and is estimated to go up to 8 if the Bhushan Power acquisition is completed this fiscal year.

“We are increasing capacities, we see demand improving and there is a better access to the export market, net debt will be coming down in the coming quarters,” Rao said.

“Demand recovery has not been uniform; the impact of COVID-19 has not been similar across India. The southern region is affected more than the northern parts. Urban areas were affected more than the rural,” he said.

“The retail sales in the first quarter increased as smaller construction and real estate projects in tier I and tier II cities, where labour requirement is minimal, picked up faster”, added Rao.

The company is also seeing positive traction from the two-wheelers and tractors segment, packaging and solar, along with consumer durables like refrigerators, dishwashers and ACs, he said.
 

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