JSW group plans $40-bn splash

Lines up investments in steel, power sectors to profit from booming demand.

The Sajjan Jindal-controlled JSW group plans to spend around $40 billion (around Rs 1,60,000 crore) for steel and power projects to cash in on the growing demand in the country. "JSW Steel will increase its steel capacity to 32 million tonnes from the current 4.8 million tonnes, while JSW Energy will build 15,000-mw thermal power capacity. These projects will be completed by 2020," said Sajjan Jindal, vice-chairman and managing director, JSW Steel.

While the capacity addition for steel will require $25 billion, power projects will need $15 billion. The group has already raised a portion of the required funds and commenced expansion and construction of greenfield projects.

Besides these investments, the group will explore opportunities in nuclear power and infrastructure. "We are in talks with foreign nuclear power majors to set up fresh nuclear power capacity in India," said Jindal.

The group is awaiting policy changes that will allow private companies to invest in nuclear energy. Once the revised policy is in place, JSW plans to enter into a joint venture for nuclear power. Jindal has not elaborated the group's investment plan for its infrastructure business.

Industry experts are of the opinion that the company will find it tough to raise funds at least for a couple of years. "The choppy market will see a correction and growth momentum will come after that. At that point of time, JSW could easily raise funds as they have proved their project implementation capability," said banking sources.

According to sources, JSW has already tied up funds to expand its steel capacity to 10 million tonnes from the existing 4.8 million tonnes. It has raised funds for 4,000-mw power capacity addition too. For the remaining projects, it will require about $30 billion.

In the current financial year, the company will be spending around Rs 6,000 crore on expansion. Of this, Rs 1,000 crore will be spent on augmenting raw material supplies. The company has already zeroed in on a few iron ore mines in Chile, Mozambique and Indonesia for buying stakes. The remaining part of the investment for this year is being routed to its plants in Vijayanagar in Karnataka and Salem in Tamil Nadu for expansion.

Moreover, the company is building fresh capacity in West Bengal and Jharkhand. By 2020, these new projects are expected to have a production capacity of 10 million tonnes each.

The company's annual production capacity of 4.8 million tonnes of steel from its Karnataka and Tamil Nadu plants would be increased to 8 million tonnes. It is also investing Rs 850 crore in its Vijayanagar plant to convert some of the ore waste into a usable grade.

The company has about 15 per cent share in the country's steel market and a 22 per cent share of the galvanised steel market. The price of iron ore rose by 70 per cent and coking coal by 200 per cent in 2007-08. The per capita consumption of steel in India is around 40 kg and is rising due to expansion of infrastructure projects, said experts. In the power sector, the country faces a peak-hour deficit of 20,000 mw in summer. Nearly 78,000 mw of capacity addition is expected under the 11th five-year plan. JSW Energy is already operating a 260-mw, coal-fired power plant in Vijaynagar, while JSW Steel owns a captive 230-mw, coal-based plant at the same location.

JSW Energy is planning a 600-mw, imported, coal-based project at Vijaynagar. Another 1,200-mw, coal-fired project is under construction in Ratnagiri, Maharashtra. The company is also setting up lignite-fired and hydel power projects in the country.