JSW Steel to spend ₹28,000 crore for expansion

JSW Steel plans to spend around ₹28,000 crore to expand its steel-making capacity by 12 million tonnes (MT) to 36.5 MT by March 2024, from the current 24.5 MT, Seshagiri Rao, joint managing director and group chief financial officer, JSW Steel, said.

The steelmaker will expand the capacity of its major plant at Vijayanagar, Karnataka to 19.7 MT from 12 MT. The capacity of Bhushan Power and Steel (BPSL), which was acquired by JSW for ₹19,350 crore during the insolvency process, will be increased to 5 MT from 2.5 MT. It recently completed the doubling of its capacity at Dolvi, Maharashtra to 10 MT, and is in the process of building mining infrastructure in Odisha.

The company will require around ₹28,000 crore for new projects at Vijayanagar and BPSL. “We will arrange the capital for new projects at a debt-equity ratio of 1:1. With the commissioning of the expanded capacity at Dolvi, the cash flow will also increase in the current financial year. In addition to the accrued cash flow, we will raise debt capital from global bond markets, export credit agencies (ECAs) and the domestic banks,” added Rao.

Doubling of capacity at Dolvi to 10 MTPA, has cost the company around ₹22,300 crore. In Odisha, the steel company has four operational iron ore mines under lease. The company is spending ₹3,450 crore towards mining infrastructure.

Domestic producers are aggressively expanding capacities as they expect steel shortage from 2024. The government’s National Steel Policy projects a requirement of 300 million tonnes per annum (MTPA) by 2030. India currently has 142 MT of steel manufacturing capacity and production is expected to be around 110-115 MT this year. The capacity needs to be expanded by 10 MT every year to meet the incremental domestic demand. In addition, there is huge demand for Indian steel in export markets which China has vacated. Domestic steelmakers exported a record 6 MT in the second quarter of the current fiscal, which is expected to hit 22 MT for the full financial year.

JSW Steel reported its highest-ever quarterly consolidated net profit at ₹7,179 crore in Q2, compared with ₹1,595 crore a year ago. Revenue from operations was also the highest ever at ₹32,503 crore, up 68.7%. High prices of steel and increasing demand for value-added and special products helped the company boost bottom line.

Net debt increased to ₹55,400 crore in the first half of FY22, from ₹52,500 crore in the same period last fiscal. Rao said the rise in debt was primarily due to the additional working capital spend of ₹8,200 crore, and half-a-million-tonne increase in inventory. The company aims to reduce the debt back to March 2021 levels in the current fiscal, he added.

The government has already shortlisted JSW in the disinvestment process for Neelachal lspat Nigam Ltd. (NINL) along with Tata Steel with ArcelorMittal. Sajjan Jindal-controlled JSW will also compete with Tata Steel in acquiring 7.3-MT Rashtriya Ispat Nigam Ltd. (RINL), for which the government is yet to invite expressions of interest (EoI). It is also interested in acquiring Nagarnar Steel, an integrated steel plant being built by NMDC in Bastar district, Chhattisgarh.