We will be net debt free by July 2022, says JSPL's MD V R Sharma

"Our main interest is not inorganic growth, it is brownfield expansion," said Sharma

Higher EBITDA, led by the upturn in steel cycle, lower capex and declining finance costs have brought down Jindal Steel & Power’s (JSPL) net debt from a peak level of Rs 46,500 crore in FY16 to Rs 11,164 crore in Q2FY22. In an interview, JSPL Managing Director V R Sharma tells Ishita Ayan Dutt that the company aims to be net debt free by July 2022. Edited excerpts:

You bagged Kasia iron ore mine in the auction at a premium of 118 per cent. How will it boost your iron ore security, and is this premium viable?

In our case, it is workable because we are putting up a pipeline and will save on logistics cost. The freight by train or truck is more than Rs 1200 a tonne of iron ore. But with the pipeline, the total cost will be Rs 200 only. So, there is an advantage of Rs 1,000 a tonne because we are in the same state.

Secondly, Sarda mine, our largest supplier, is not in operation. We thought as raw material security, this was a very good deal for us.

What kind of iron ore security will you have with the capacity expansion that has been lined up?

With the Kasia mine, we now have two mines. We want to have 50 per cent iron ore security and will be participating in auctions of new mines to take care of the capacity expansion.

Coking coal prices have gone through the roof. With your mines outside, what kind of security do you have on the coking coal front?

We have coking coal mines in Mozambique, Australia and South Africa. One of the mines in Australia is operational after a long time. So 60 per cent of our coking coal is from our own mines that are overseas, and we have to buy the balance. We will maintain this ratio.

You have a net debt of Rs 11,164 crore. What are your goals?

We will bring it down to Rs 5,000 crore by the end of this financial year and by July next year, we will make it zero.

You submitted an EOI for Neelachal Ispat. Will you be putting in a bid?

We submitted an EOI. But our main interest is not inorganic growth, it is brownfield expansion. For older plants, technology has to be redone. So, our main aim is to put up a plant with superior technology.

You have an expansion plan to increase capacity to 16mt from 9.6 mt by FY25. Will you have to take on additional debt?

Our last declaration said, we want to achieve Rs 15,000 crore of EBITDA per year. If we have Rs 15,000 crore EBITDA, then net profit will be Rs 8,000-8,500 crore. So, we will be utilizsng it for the plant and machinery for our expansion.

Will you be adding capacity in flat or long steel products?

It will be mainly in flat. We are already there in long products and now we want to grow in flat.

How is the domestic demand?

The market is good and the country is doing extremely well. GST collection of Rs 1.3 trillion in October is a very good sign. We are moving in the right direction.

I expect projects that are stuck to start in a major way. Steel prices are a little high because of coal prices, but thyey will come down once coal prices and shipping cost come down. Shipping cost has already started coming down. Maybe, it will not be seen in this quarter, but it will definitely reflect in the next quarter.

Are exports still at elevated levels?

Last quarter, more than 40 per cent of volumes was exports. But our annual plan is to have exports at 30 per cent and we will maintain that.

But there could be more opportunities for exports. With the easing of tariffs between the US and EU, Europe is expected to supply more to the US, which is more lucrative for them. Currently, they are supplying to MENA countries where there will be a vacuum and we can easily fit in.