JSW push to see Bhushan Power & Steel post best-ever performance in FY22

Firm has been able to achieve full capacity utilisation; Exports ramped up, accounted for 36% of sales mix in Q3FY22

A strong steel cycle, backed by measures taken by JSW Steel, is set to power Bhushan Power & Steel to its best financial performance in FY22.

Seshagiri Rao, joint managing director and group chief financial officer, JSW Steel, confirmed that BPSL would post its best financial performance in this fiscal. “BPSL will do well. We are able to operate at 100 per cent capacity,” he said.

In the nine months ended December 31, 2021, Bhushan Power & Steel (BPSL) recorded an EBITDA of around Rs 4,850 crore and profit after tax (PAT) of Rs 3,200 crore. Profits in Q3FY22 were lower compared to the previous quarter with a slowdown in steel demand and higher input cost, but EBITDA per tonne has been at Rs 26,000 for the last two quarters.

According to Capitaline database, the highest PAT between 2003 and 2017 for BPSL was Rs 635.49 crore in 2014 on net sales of Rs 10,312.93 crore. In July 2017, BPSL was admitted by the National Company Law Tribunal (NCLT) for resolution under the Insolvency and Bankruptcy Code (IBC) mandated by the Reserve Bank of India.

After an intense bidding process, the 2.7 million tonne (mt) plant came into the JSW Steel fold in March 2021 after JSW paid creditors Rs 19,350 crore even as litigations were pending in the Supreme Court. Since then, initiatives have been taken by JSW Steel to bring down the cost and focus on sales mix.

“We commissioned the sinter plant, coke oven plant and beneficiation plant. So costs have come down,” said Rao.

The value-added downstream is also fully operating. “We produce 2,00,000 tonne of HR coil every month, out of that only 30,000 tonne goes to the market; the balance is in the form of value-added. These are certain strengths that we have been able to leverage,” said Rao.

Exports have been ramped up and accounted for 36 per cent of the sales mix in Q3FY22. “Earlier BPSL was not doing that much of exports, but now it is sizeable,” Rao further pointed out.

Steel is a cyclical industry and fluctuations in prices keep happening. So, JSW has increased BPSL’s exposure to the OEM segment.

“Prior to our takeover, it used to be majorly focused on the retail market. But if you are focused on retail, then even a small change immediately impacts. So we have brought in stability by increasing sales to the OEM segment,” he explained.

The past two years have been good for the industry, though, with prices touching record levels. Most companies are adding capacity in a significant way. JSW Steel has set an overall target of achieving 37.5 mt by FY25.

As part of it BPSL’s capacity is being ramped up from 2.7 mt to 3.5 mt, which would be completed by March 2023. In the next phase it would go up to 5 mt.

Rao, however, said that it would be brownfield expansion and not much expenditure would be involved to increase capacity from 3.5 mt to 5 mt. “We have to kick off expenditure; we have not taken a call, as yet,” he said. But BPSL has land and infrastructure to increase capacity up to 10 mt.

Effective October 1, 2021, BPSL became a subsidiary of JSW Steel as it increased stake from 49 per cent earlier to 83.28 per cent.

BPSL

	Q3FY22 (Rs crore)	Q2FY22 (Rs crore)
Revenue from operations	5,083	6,478
Operating EBITDA	1,547	2,022
Profit after tax	1,018	1,443