JSW to raise $1 bn from overseas, domestic markets to retire debt

Sajjan Jindal-owned JSW Steel is raising close to a $1 billion from both overseas and local investors by selling new bonds.

While $500 million will be raised from foreign investors, the company will raise $540 million (Rs 4,000 crore) from local investors. The company has hired Deutsche Bank, Citibank, Standard Chartered Bank and Credit Suisse to manage the foreign bond issue, said a source. 

JSW Steel will use the proceeds to retire its older debt and for other general corporate purposes. The company has also agreed to acquire Bhushan Power and Steel for Rs 19,700 crore and has kept the funds ready for the acquisition, though there is litigation from the former promoters and the Enforcement Directorate.

Top Indian companies that raised funds over overseas sources include Vedanta, Reliance Industries and ONGC Videsh (see chart).

“JSW had raised around $400 million from overseas last year in September to retire its old loans,” said a banker close to the development.

Apart from Bhushan Power, JSW Steel is also in the race to acquire Asian Colour Coated Ispat Ltd for Rs 1,550 crore. But its acquisition of ACCIL has also hit a legal hurdle with a US-based fund, Interups, making a higher bid to the banks.

JSW had already acquired Monnet Ispat for Rs 2,875 crore in 2018 under the insolvency and bankruptcy process. It has also decided to reduce its capex by half to Rs 9,000 crore in the current financial year. 

According to analysts, due to the ongoing capex, the debt levels will continue to remain elevated for another one year. With commissioning of enhanced capacity of 5 million tonnes a year at Dolvi, the profitability and cash flows are expected to improve, which in turn, will result in moderation in the overall gearing and improvement in debt coverage ratios from FY22 onwards, Care rating said in a statement.

The company had earlier announced a massive capex project of Rs 48,515 crore between FY18 and fiscal FY23, which includes plans for expansion of the company’s steel-making capacity by 33 per cent to to 24 MTPA and downstream capacity by 50 per cent. 

Its actual capex spend in FY20 was Rs 10,200 crore as against earlier planned Rs 15,708 crore for FY20. With this, the company has incurred Rs 23,928 crore of capex during FY18-FY20. However, with the Covid-19 outbreak, project activities were severely hampered and it has now revised its planned capex for FY21 from Rs 16,340 crore to Rs 8,200 crore.