Our margins are strong enough to service debt

Concerned about the dull business environment in the steel sector, Sajjan Jindal, chairman and managing director of JSW Group, has deferred his long-term investment plans. In an interview with Aditi Divekar, he talks about how he plans to service the company’s Rs 36,000-crore debt. Edited excerpts:

JSW Steel had announced plans to invest $22 billion to raise capacity to 40 million tonnes (mt) by 2025 from the current 14.3 mt. Where does that stand?

The entire sector is going through a rough phase and we have deferred our investment plan as of now. We have not slowed, we have just deferred it. We are not going to look at any investments abroad, whether it is Europe or the US. Going ahead, we will focus on the Indian market alone. Having said that, the deadline of 2025 by which the investments are to be made remains intact and we have no plans to extend this time period.

The company’s margins have come under pressure due to lower realisations and muted volume growth. How do you plan to service your debt, with the outlook for this sector continuing to remain subdued amid rising cheap imports?

I agree the margins are low due to weak domestic steel demand. But these are strong enough to service the debt we have on our books. I am not worried and do not see any challenge in servicing the debt. It is being taken care of and things are going fine for our steel business. Besides, from a debt perspective, as a whole, JSW Group is fairly alright.
If you see the debt-to-equity and debt-to-Ebitda (earnings before interest, tax, depreciation and amortisation) levels in the sector, we are relatively the best.

JSW Steel is now the country’s largest steelmaker. Despite a strong top line, the company has no raw material security and is at the receiving end in terms of iron ore requirement. What are the steps being taken to address this?

We are quite confident that once the iron ore mines are auctioned, it will solve a majority of our problems. A captive source of iron ore is very crucial for JSW, as we are an integrated player. Our input costs will come down considerably and the facility will also get uninterrupted quality supply. Having said that, this financial year, we expect our iron ore imports to fall compared to last year, owing to better availability of raw material in the domestic market.

Steel pricing in North America is expected to improve in the second half of this year. Do you see a better performance by your US plates-and-pipes plant?

Steel consumption in the US market hasn’t picked up. There are no signs of green shoots, at least in the US steel sector. China has been dumping steel all across and US is suffering due to China. In such an environment, I do not see the JSW steel mill perform any better. Its capacity utilisation levels will continue to remain low.
You had planned to sell 10-15 per cent of your stake in JSW Energy to fund acquisitions. What is the status?

I am not sure if the stake sale will happen. If it does, you will get to know of it then. As of now, no decision has been taken. Also, there is no timeline drawn on when the sale will happen. Currently, we are looking at certain other specific assets for acquisition. But as of now, we cannot reveal which ones. In this business, we plan to grow inorganically