Very strong India story will play out going ahead: JSW Steel Joint MD & CEO

In a Q&A, Jayant Acharya says he sees private capex coming in now, since capacity utilisations have improved

JSW Steel’s consolidated net profit, at Rs 3,664 crore in Q4FY23, was led by additional volumes from its ongoing expansion. In a conversation, Jayant Acharya, the newly appointed Joint Managing Director and Chief Executive Officer of the company, tells Ishita Ayan Dutt that by FY25 the company would be adding 10 million tonnes (mt) of capacity and as that gets completed, the next leg of expansion to 50 mt would be taken up. Edited excerpts:

JSW Steel’s performance in Q4FY23 was ahead of Street expectations. What is the outlook for FY24?

Our volume numbers in Q4 have been the main performance driver. We have done very well in terms of crude steel production across Indian locations and even in Ohio, USA. The subsidiaries have done very well from an Ebitda standpoint–Ohio did not breakeven, but it reduced its losses; Baytown (Texas) did quite well and in Italy, we got rail orders.

Back home, the domestic story has been playing out with very strong demand growth of about 13 per cent in both, the quarter and the year (FY23). Going forward, I see a very strong India story playing out.

The Indian government has been focusing on capex in a very concerted fashion. We also see private capex coming in now, since capacity utilisations have improved. We see the situation improving across sectors. Therefore, 8-10 mt of steel demand growth in FY24 in India is very much possible.

What about global demand?

Demand, sentiment and prices improved in the last quarter on China opening. We saw buying across geographies. It did go down a bit primarily because some prices corrected as the Chinese domestic demand didn’t shape up as expected. But the situation is stabilising now with China announcing that it would like to limit production to CY22-level. It means that in the next eight months they would be limiting the production by about six mt every month. That would be a big positive for the global steel industry and prices.

JSW has indicated that by the end of FY24 it will be adding 6.5 mt capacity. Are you confident that market conditions would support this kind of additional volumes?

We are currently at about 28 mt and our capacity expansion to 37 mt in India is on track. Seeing the Indian growth, we are confident that this capacity will be majorly absorbed here. For a year or so, we may have some exports and then it moderates. But we are shielding ourselves not only with volumes but a balanced product mix with a focus on value added steel.

You would be adding about 10 mt by FY25. Have you chalked out the next phase of expansion?

We have a potential to add capacity in brownfield expansion in Dolvi (Maharashtra), Vijaynagar (Karnataka) apart from additional facilities at Jharsuguda (Odisha). Our focus would be to look at Dolvi and Vijaynagar where certain facilities in infrastructure have additional capacities.

Can you specify the additional capacity that can be added?

We had given our journey earlier that we would like to be in the range of 50 mt in India. Between Dolvi and Vijaynagar we can potentially add 10 mt and the balance can come from Jharsuguda.

When would you take a call on this?

We'll allow the capacity in progress to get completed. So we will take a call at an appropriate time.

The potential for growth in India is strong. We see the Indian GDP from a per capita income point of view unfolding and that is a huge consumption opportunity. The rural side will improve – the kind of appliance buying we are seeing there makes it more and more evident that appliances are no longer a luxury and its capacity in India will grow.

The capex for FY24 has been pegged at Rs 18,800 crore. Do you see net debt increasing from the current level of Rs 59,345 crore?

Post-merger of JISPL (JSW Ispat Special Products), which is expected this year, the debt may go up by about Rs 3,000 crore. But it will be range bound after that because the capex is getting met mostly through internal accruals. We are raising some finance to refinance the debt which is falling due.

You have submitted an EoI (expression of interest) for NMDC. Is there any decision on whether you would be going ahead with a bid?

At this stage we have just given an EoI and the data room has just started opening. We have to do a full due diligence and only then will take a view-it’s too early to comment. But our focus will also be on our brownfield expansion because that will be at a much lower specific investment cost.