2024-12-12 06:00:10 :
Acharya, who is also the company’s joint managing director, said the steel-to-car conglomerate has hired consultants to explore the financial feasibility of such an expansion. He clarified that the plan is in its early stages and no decisions have been made yet.
“As of now, we have not received any call about which metal to choose or not to choose, but we are willing to look at alternative metals,” he told Mint in an interview at the JSW Group’s massive headquarters in Mumbai’s Bandra Kurla complex. The matter is being considered but it is too early to comment. It may be a different entity (through) or it may not be JSW Steel.”
He said growing electrification trends have increased demand prospects for a variety of metals including copper and aluminum, providing reason for the group to pursue avenues of diversification.
JSW Steel and Aditya Birla Group’s Hindalco are vying to acquire two copper mines in Jharkhand owned by public sector company Hindustan Copper, PTI reported in October last year, citing unnamed sources.
Acharya reiterated the challenges faced by Indian steelmakers due to the surge in cheap imports and its impact on steelmakers’ profit margins.
“The challenge is that as margins continue to compress, so does financing capacity. Capex will be moderated and it will take more time to get this all done (expanding to other metals),” he said.
Capital expenditure cuts
Sajjan Jindal-led JSW Steel has reduced its capital expenditure (capex) plan for FY25 from $20,000 Crores Rs. $1,600-17,000 crore to transfer a 300-km-long slurry pipeline project to listed group company JSW Infrastructure and postpone the construction of the third blast furnace at its Vijayanagar plant to FY2026.
He said the company may also postpone other capital expenditure plans if imports do not ease.
“If you have no understanding of the policy, then why will your shareholders allow you to spend hundreds of millions of rupees in the hope that the Chinese will not come or the FTA countries will not come here,” said Acharya, who is now cutting capital expenditure. , because the profit margin is insufficient for further capital expenditures. “
FTA stands for Free Trade Agreement, under which many countries, including ASEAN members, sell steel to India without paying any duties.
Rising imports have forced Indian steelmakers to cut prices to unsustainable levels, he said, adding that JSW Steel’s Ebitda margin has fallen from $Around 12,500 tons per ton in fiscal year 2024 $9,500 per ton this fiscal year.
Earlier this month, Union Commerce and Industry Minister Piyush Goyal, Union Steel Minister HD Kumaraswamy and executives of major steel mills held a meeting in New Delhi. At the meeting, the steel ministry proposed imposing 25% safeguard duty on imported steel, PTI reported, citing unnamed sources.
Data from market intelligence company BigMint shows that India’s steel imports in the first half of FY25 were about 5.1 million tons, a 54% increase from the same period last year. During this period, China surpassed South Korea to become India’s largest steel exporter, accounting for nearly half of India’s total steel imports.
overseas ambitions
Acharya said JSW Steel is optimistic about India’s growth prospects despite pressure on margins in recent quarters. The company plans to increase annual steelmaking capacity to 50 million tons by the end of this decade from about 28 million tons currently. The company is expected to reach a production capacity of just over 34 million tonnes per annum (MTPA) by the end of this fiscal year and just over 42 MTPA by the end of fiscal 2028.
While the company is bullish on growth in India, it has adjusted its overseas growth ambitions as the world moves away from globalization. JSW Steel has one plant in Italy and two plants in the United States. These plants were set up with the aim of supplying raw steel from India which could then be further processed in western countries for higher profits.
However, as countries implement trade protectionist policies, steel imports lose their competitiveness, and JSW’s overseas steel companies continue to lose funds.
Acharya said the company will not invest more money in Italy or the United States at this time, but has no plans to divest assets.
India’s growth story
Analysts at ICICI Direct pointed out in a report in late October that although India is the world’s second-largest steel consumer, India’s per capita steel consumption is 98 kilograms per year, well below the global average of 233 kilograms. They said that the Indian government’s promotion of infrastructure development may increase per capita steel consumption to 160 kilograms in fiscal year 2031, giving Indian steel manufacturers a lot of room for growth.
“With strategic capacity expansion in place, favorable domestic steel demand and improving profitability, JSW Steel is poised to deliver record performance going forward,” analysts at ICICI Direct said, recommending investors to overweight the stock with a target price of $1,130.
Analysts at BobCaps are more cautious on the stock, recommending investors to hold on to their positions with a price target of $975. The company is more vulnerable to changes in the commodity cycle than peers due to its higher target net debt to Ebitda ratio of 3x and a higher threshold of 3.75x.
JSW Steel shares closed 1.3% lower $The BSE index was at 999.85 on Wednesday. The Sensex closed 0.02% higher.
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