JSW eyes port asset acquisitions, to cut debt at its steel unit

CFO says that it will be going for inorganic growth; plans expanding capacity & production to cut its debt at steel unit

JSW Group, whose businesses range from power to steel and cement, is looking to buy distressed port assets in the country as part of a strategy for a massive expansion of its ports capacity, its chief financial officer said.

“We are going for inorganic growth as there are assets that is available and that makes more sense today, and at the same rates or rates much lower than that of organic growth,” CFO Seshagiri Rao told Reuters in a recent interview.

The acquisition push comes as many of JSW's domestic peers in a heavily leveraged industry look to sell assets to pay off debt racked up in recent years, before India's economy began to cool. Rao said JSW itself plans to cut borrowing at its debt-laden steel unit by expanding capacity and production.

Having borrowed heavily to expand its steel and power arms, JSW was named by Credit Suisse last year as one of India's 10 most indebted groups, with debt pile equal to $8.6 billion in the fiscal year ended last March.

JSW Infrastructure, the group's unlisted ports unit, currently has a port capacity of 33 million tonnes spread across three ports on the western coast of India. The company plans to increase that more than six-fold to 200 million tonnes by 2020, Rao said. 

Rao said the group's flagship firm, JSW Steel, is expanding production capacity by 4 million tonnes by end of this month to take it to 18 million tonnes per year.

That will help lower the steel unit's debt ratios. Debt-to-equity and debt-to-EBITDA (earnings before interest, taxes, depreciation and amortisation) ratios will drop to 1.75 and 3.75 respectively by the end of March 2018, from 1.83 and 6.66 at the end of December 2015, he said.

JSW Steel, in which Japan's No. 2 steelmaker JFE Holdings Inc owns a 15 percent stake, and JSW Energy currently have a combined debt of 550 billion rupees ($8.08 billion). 

Rao said the businesses were able to service their loans.

Rao said JSW's port and cement units both make money, and JSW can raise debt or equity to fund acquisitions.

The CFO also confirmed domestic media reports that JSW is actively considering expanding cement operations, including by acquiring 11 million tonnes per year of India cement-making capacity from Franco-Swiss giant LafargeHolcim Ltd.

Also on the group's radar is local rival Jaiprakash Associates' 20 million tonnes per year cement business.