JSW Steel to invest Rs 15,000 crore in 5 mn tonne capex at Vijaynagar works

Analysts see capex value accretive; in line with country's consumption growth outlook

Sajjan Jindal-led JSW Steel today said it will be investing Rs 15,000 crore to expand capacity at its Vijayanagar facility in Karnataka for commissioning in FY24.

Of the total six-million-tonne expansion planned, the new part of the project consists of 5 million tonnes and one million tonnes at the existing facility through optimisation.

Today, Union Steel Minister Ram Chandra Prasad Singh laid the foundation stone of the new 5-million-tonne project at JSW Steel Vijayanagar Works integrated steel facility in Ballari, Karnataka.

The Environmental Clearance (EC) for the project has already been received from the Ministry of Environment, Forests & Climate Change, Government of India and preliminary clearance from the ‘Single Window High-Level Clearance Committee’ (SHLCC), Government of Karnataka has also been secured, said JSW Steel in its release.

“The new 5 MTPA project at Vijayanagar is aligned to our Sustainability goals and focus on circular economy by optimizing our water, waste, carbon and energy footprint,” Sajjan Jindal, chairman of JSW Steel was quoted as saying.

In September 2021, JSW Steel had raised $1 billion (Rs 7,300 crore) through issuance of Sustainability Linked Bonds (SLBs) in the overseas market.

“The proceeds of the issue will be used by the company to fund capex plans as well as for refinancing debt,” JSW Steel had said.

Apart this, the integrated steel producer in its Q4 results of FY21 had indicated of an unspent capex of Rs 21,162 crore. Analysts are of the view that the company has enough liquidity to carry out this planned expansion.

Alongside, the brownfield expansion project of one million tonne is being undertaken through JSW Vijayanagar Metallics Ltd, a wholly owned subsidiary of JSW Steel Ltd, said the company.

“The one million tonne which will take Vijayanagar capacity to 13 million tonne should be commissioned in the next 12 months,” said a company source close to the development.

Shares of JSW Steel today ended at Rs 674 per share, up 0.15 percent from Thursday close on BSE.

Post these expansions, the total capacity at Vijaynagar will go to 18 million tonne forming part of JSW Steel’s next phase of growth, targeting an overall capacity of 37.5 million tonne in India and USA by FY25.

“We (Care Ratings) are expecting India’s steel consumption to grow 7-7.5 percent per annum over the next five years. So, JSW Steel’s capex is in line with the country's requirement and should get absorbed by the market,” said Hitesh Avchat, associate director at Care Ratings.

Alongside, brokerages were of the view that the new project of 5 million tonne expansion is value accretive since it would be a capex of around Rs 3,000 crore per million tonne as against usual project cost for one million tonne steel capacity which comes at about Rs 5,000 crore for every million tonne.