We are committed to a circular economy and consistently optimising our water wastecarbon and energy footprint by aiming to achieve stricter than mandated standards whilebeing part of an industry that provides a large-scale solution to combat climate change.
Chairman and Managing Director
Dear Shareholders and friends
I hope that this finds you and your families safe and well.
The last 15 months have been perhaps the most eventful in living memory. The COVID-19pandemic has impacted the lives and livelihoods of people across the world in what mightbe one of the most significant black swan events of our time. However through theseunpredictable times we have witnessed remarkable scientific progress multilateralcooperation government responsiveness and rapid global transformation - many of whichwill impact the way we live and interact with each other. Several countries includingIndia are now emerging from the throes of a brutal second wave of COVID-19. I am hopefulthat the worst is behind us and that better days are ahead.
At JSW Steel we consider ourselves fortunate to be significantly ahead of the curve interms of scale and efficiency a testament to our ability to respond and navigatecomplexities in a timely fashion. As we regain our operational momentum I am certain wewill be able to reach newer heights.
Upon reflection I can confidently say that in the past year JSW Steel has deliveredon all fronts. We were able to execute our growth strategy in a manner that createdexponential value for all stakeholders while consistently delivering on our promises toproduce stronger and more sustainable steel.
Prioritising the lives of citizens over steel production
In order to deliver on our Corporate Social Responsibility promise we mobilised ourresources both human capital and infrastructure to help support communities governmentsand front-line workers. Our steel complexes despatched over 55000 MT of liquid medicaloxygen from March through May to hospitals across India. Our cross-functional teams movedswiftly to set up COVID-19
hospitals across Vijayanagar Dolvi and Jharsuguda with a cumulative capacity of ~1500beds. We supported over 2 million patients across more than 500 hospitals.
We continue to offer holistic medical support to our employees and their families whilehonouring our commitment to take care of their entire family in the event of death fromCOVID-19 during their time in service.
Our Commitment to Safety Sustainability and Social Responsibility
Managing Environmental Social and Governance (ESG) risks is a business imperative anddirectly affects profitability and shareholder value in the long run. The need for us toconsume resources wisely regulate carbon emissions and manage social and governancefactors is more pressing than ever. At JSW Steel we recognise this responsibility. Tothat end much of our strategic thinking around production and processes centre aroundwhether we lie within our specified ESG framework.
We are placed highly in the world on multiple sustainability parameters being rankedas a 'Sustainability Champion' by WSA for the last three years. Our CDP rating of 'A-' isone of the best in the Global Steel Industry. But this is not enough. We continue to setthe bar higher by training our sights on stricter than mandated standards.
We are committed to a circular economy and it is with that focus that we strive toconsistently optimise our water waste carbon and energy footprint. For example we haveresolved to improve net carbon emission intensity well beyond India's NationallyDetermined Contributions as per the Paris Accord commitments with an aim of achievingmore than 41% reduction by 2030 (from the base year of 2005).
To reinforce such commitment we have a clearly defined sustainability strategy withambitious yet credible targets set across 17 key sustainability indicators.
During the year we invested considerably in best-in-class technologies to reducematerial consumption improve coke rate and optimise the use of alternative fuels. TheCarbon Capture Utilisation S Storage (CCUS) technology at our DRI Plant in Salav recoversCO2 which is then retailed as a value-added product for use in the beverage industry. The20 MTPA pipe conveyor at Vijayanagar transports iron ore directly from our captive minesreducing emissions exponentially. The carbon sink created through three millionplantations for systematic afforestation is part of our biodiversity-preservationobjectives. Further we are working to procure ~1 GW of renewable energy to power ouroperations at Vijayanagar Dolvi and Salem - in what will be the largest such project ofits kind in India.
However to achieve our sustainability targets on each front year after year thestrategic framework and efficiencies need to be communicated and implemented across ourentire value chain. To this end we work closely with our supply chain partnersencouraging them to integrate sustainability practices into their everyday operationswhile engaging with our customers on how to build efficiencies of scale furtherdownstream.
In essence we are making stronger responsible and greener steel a concept unheard ofeven a decade ago and one that allows us to touch other industries - through tinplate thatwe supply to the food packaging industry products for solar structures and AdvancedHigh-Strength Steel that meets light-weighting and safety requirements of the automotiveindustry.
Product sustainability is a part of our commitment to customers with life-cycleassessment for all finished products underway allowing us to communicate environmentalimpact dynamically and transparently.
We are also making Environmental Product Declarations (EPDs) for many of our productsand working on GreenPro Eco-Labelling of our TMT bars and other construction materials.
We preserve and protect our social license to operate by collaborating with communitiesand championing many initiatives as part of our CSR programme. These initiates range fromhealth and nutrition agriculture water management to empowering women - all of which arebeing increasingly delivered through innovative technology platforms. Our efforts haveimpacted over a million lives spanning over 1000 villages across 11 states.
Imbibing a 'zero harm' culture across operations is fundamental to our thinking. Weensure consistent reductions in our Lost time injury frequency rate (LTIFR) and continueto improve health and safety parameters.
Our 'Vision 000' which focuses on zero major accidents injury and harm is on track andis being driven by our expert 'Safety Champions' across production sites.
A Tale of Two Contrasting Halves
Across economies commodities and specifically steel FY 2020-21 was a year of twocontrasting halves - the first witnessed a massive downturn and the second witnessed anequally resilient upturn and recovery. Governments and central banks worked in tandem tocushion and stabilise this volatility while policies were designed to facilitate growth.
The story was no different in India. Our Government responded with alacrity inannouncing relief measures for the most vulnerable while supporting SMEs with a series ofintelligent measures that focused on capacity building and being future-ready. This wasdone even as severe restrictions were enforced on human mobility and economic activityduring the extended national and state lockdowns.
Consequently India's annual GDP performance was better than expected and the comingyears appear promising even after accounting for the disruptions caused by the secondwave of the pandemic.
The global steel industry proved its resilience and witnessed a strong surge of demandin the second half of the year. We believe that the industry is built on robustfundamentals and as a result prices have strengthened significantly from the average ofthe previous year. Steel continues to hold its position as the most affordableuniversally consumed and versatile material that is deployed in solving many of theworld's present-day challenges.
Indian Steel producers also witnessed gradually improving utilisation levels andincreased exports during the year underscoring our competitiveness as an industry.Domestic demand also rebounded with the second half of the year seeing a return ofmonthly dispatches to pre-COVID levels. We expect that increased infrastructure spendingrising demand from automotive and construction together with a revival of private capexand consumer demand will continue to drive steel consumption.
A Resilient Efficient and Nimble Response
Despite the prevailing uncertainty our team rallied to deliver a strong operationalperformance a testament to our well-defined strategic framework in place alongsidesuperior execution capabilities.
Commencing production at our iron ore mines in Odisha enabled a steady stream ofquality ore ensuring production continuity and allowing us to sweat our assets. Ouracquisition of iron ore mines through auctions has proved to be a game-changer. Theability to focus on inorganic expansion saw us make four key acquisitions in the year -Bhushan Power a Steel Vallabh Tinplate PCMD Division of Welspun Corp. and Asian ColourCoated. These acquisitions enhance our capacity and strengthen our downstream capabilitiesand product mix. We also demonstrated agility by switching rapidly between exports anddomestic sales in line with the shifting demand patterns. Moreover we set our overseasoperations on a turnaround path and expect improved performance from them in FY 2021-22.Lastly our share of value-added products accounted for 52% of sales and nearly half ofall sales to the retail segment comprised branded products.
Better average realisations cost optimisation and efficiencies meant that we were ableto grow topline by 9% and saw our operating EBITDA increase to '20141 crore (a 70% risefrom last year's figure of '11873 crore) despite higher iron ore and energy prices.
Adding Capacity and Upgrading Capability - Leveraging a Strong Balance Sheet
Over the past three years we have deployed over '48000 crore of capex to increase ourproduction capacity by 50% (through organic and inorganic routes) without increasing debt.Together with our JVs and the 5 MTPA expansion at Dolvi that will be commissioned in thenext few months JSW Steel will have ~28 MTPA of steel-making capacity including the 1.5MTPA capacity in USA. These investments efficiently executed have given us higherproductivity superior cost profile and wider portfolio of lucrative value-added products- to serve a growing domestic and global market.
We are now embarking on the next phase of growth with the newly approved capex plan of'25115 crore. This capital will allow us to augment our crude steel capacity atVijayanagar by 7.5 MTPA enhance and digitise our mining capabilities and infrastructurein Odisha and help us set up a state-of-the-art colour-coated facility in Jammu a Kashmir- to support local demand and development in the state. In addition we are focusing onupgrading our acquired facilities through efficiencyenhancing projects. Together theseinitiatives will see the combined capacity of JSW Steel including JVs and associatesexpand to ~37.5 MTPA by FY 2024-25.
Our balance sheet is getting stronger as we improve cash flows and efficiently allocatecapital. With the new capacities and strong price environment we expect our net-debt toEBITDA ratio to be ~2.75. We are consistently reducing our cost of capital with access todiverse pools of liquidity and strong relationships with institutions across the world.Our credit ratings from both domestic and international agencies remain strong.
Our efficient capital allocation and industry-leading project execution skills meansthat we are able to scale capacity at industry leading capex per tonne in record time. Wehave delivered an industry-leading Total Shareholder Return CAGR of 24% over the past 10years which validates our efficient capital allocation and execution. The Board hasrecommended a dividend of '6.5 per share which is our highest ever and will lead to atotal payout of '1571 crore.
Adding Value to Steel through Technology Innovation Digitalisation and Partnerships
At JSW Steel we have always believed in leveraging advanced technologies to maximiseefficiencies and service levels. We have recently launched a group-wide digitalisationjourney with 6000+ employees being engaged in the cultural transformation across 100+exciting projects. These projects cover a range of Industry 4.0 technologies such as IoTArtificial Intelligence
Machine Learning Virtual Modeling & Simulations all of which are focused onhelping us optimise our cost profile integration across our sites value-addition ofgrades customer satisfaction levels and safety standards. A few key projects beingimplemented at the backend include digitalising our advanced planning systems logisticsoperations and mining activities. In addition core support functions such as finance andHR are seeing end-to-end digital transformation. At the front-end we are creatingplatform based solutions such as Aikyam to offer institutional customers an integratedexperience as part of our JSW One initiative.
Our long-standing collaboration with JFE of Japan has helped us upgrade our productmix processes and systems. As a result we now make multiple high- value-added steelgrades that render superior margins and contribute to a self-reliant India through importsubstitution. We are now working with JFE on a feasibili study for manufacturing ColdRolled Grain Oriented (CRGO) Electrical Steel in India a product that is current importedin entirety.
We are also recalibrating our R&D from a process-oriented approach to a product-oriented approach. As a result our innovation and research function will increasinglyfocus on understanding customer requirements and develop a larger variety of specialtygrades as well as specialised solutions to meet our customer's evolving requirements.
Looking Forward with Positivity
I have no doubt that the Indian growth story will continue to build on its upwardtrajectory fueled by a sizeable human capital base robust domestic consumption andever-expanding manufacturing capabilities.
The government is moving to increase share of manufacturing in GDP to 30% by 2030 andexpects India to have a steel capacity of 300 MTPA by then. Global supply chains arewitnessing realignment with a China+1 sourcing approach as buyers balance cost andstability benefiting India. The scale quality and speed at which India is buildinginfrastructure - metros airports freight corridors high- speed trains and roadnetworks will further enhance productivity and accelerate growth.
JSW Steel's unrelenting focus on doing 'Better Everyday' has resulted not only in oursuperior financial performance as India's largest steelmaker but the ability to deliveron equally important ESG targets thus increasing shareholder value over time. Ourambitions are supported by a structurally positive outlook for steel demand and pricingdriven by massive infrastructure outlay controlled expansions in China and a wave ofenvironmental restrictions that are resulting in capacity moderation across the world.
Acknowledgement and Gratitude
I would like to offer my immense gratitude to our Board shareholders bankers and thebroader JSW family that has stood by us through an unusually trying time and helped usnavigate the recent uncertainty. I would also like to thank external authorities that haveput their trust in us and with whom we work closely. Finally my sincere thanks to theentire JSW Steel team who worked tirelessly to deliver the highest levels of service overthis past year; as reflected in our performance; and continue to progress with optimism onwhat we can achieve.
I look forward to your continued support as we embark on this new phase of growth - onethat will not only build a stronger future for India but also contribute to a cleanergreener planet for generations to come.