SittinG at Jindal Mansion in downtown Mumbai?s Peddar Road with a three-member senior management team he shared his dream to embark upon an integrated steel project worth Rs 3,300 crore. His managers thought it was just the zest of a 32-year-old entrepreneur, who had little clue about business realities. That was fifteen years ago, when Rs 3,300 crore was no mean feat, especially for a guy who was steering a business worth a mere Rs 100 crore. But, today at 47, when Sajjan Jindal, vice-chairman and managing director of the JSW group, talks about taking the group to a turnover of 1 lakh crore in the next 10 years, his senior management team gears up to the task of implementing it with the inherent belief that they can work upon it.

Today, JSW is not only looking at fortifying its position in the steel industry by targeting a capacity of 31 million tonne by 2020, but is also on the threshold of entering businesses like power, cement, aluminium and infrastructure. ?Our core competence lies in bulk materials. We have created verticals in steel, aluminium, energy, cement and infrastructure,? says Jindal.

Having merged group company SISCOL, a downstream steel facility in South India, JSW Steel is now the third largest steel maker in the country, but instead of resting on his laurels, the restless entrepreneur has recently floated four new companies ? JSW Cement, JSW Aluminium, JSoft Solutions and JSW Infrastructure and Logistics. This together with the existing JSW Steel and JSW Energy will form the core of the group?s future activities. ?Steel will remain at the heart of all our businesses, we learnt a great deal about power by operating our captive power plants. Aluminium is also a lot about using power, steel plants generate slag, and ash is a byproduct of power plants, which are raw materials for cement. We also have expertise in managing ports and townships, hence infrastructure, and to run all that we need software,? simplifies Jindal.

JSW Energy, the holding company for all the power businesses, has lined up investments over Rs 11,500 crore. The first is a Rs 1,860-crore, 600 MW power plant in Vijayanagar, Karnataka. Next is a 1200 MW power plant in Ratnagiri with an investment of Rs 4,500 crore. The company has also floated Raj West Power Ltd (RWPL), which is setting up a 1,000 MW lignite based thermal power plant at Barmer in Rajasthan.

Power generation apart, the company is also actively looking for opportunities in transmission and distribution. ?We want to have a presence across the entire scope of the power business,? says N K Jain, vice-chairman, JSW Energy.

JSW Cement is looking at an investment of Rs 1,300 crore to set up an initial capacity of 4 million tonne spread across Karnataka and Andhra Pradesh. This is essentially to cash in on the ash and slurry generated from its steel and power plants. Work has started on this project already.

On the other hand, JSW Aluminium has chalked out an ambitious Rs 9,000 crore plan to set up a 1.4 million tonne alumina plant and a 0.25 million tonne aluminium smelter in Andhra Pradesh. The group already has a port in Goa that enables it to import raw materials and export finished goods. It?s now looking at setting up another port in Jaigarh in Ratnagiri, Maharashtra at an investment of Rs600 crore. This is strategically located to enable JSW Energy?s 1,200 MW power plant in Ratnagiri to take off smoothly.

Is Jindal biting more than he can chew? ?He is extremely methodical and will not step into any project unless he is sure about it,? says an investment banker. The fact that all three power projects have already attained financial closure so soon is a proof in point, he adds. ?I have gone through the rigour, seen bad times, so I will never taken on anything unless I am absolutely sure of delivering,? says Jindal. ?I think India has the potential to become one of the greatest countries and I want to be a part of the nation building process,? he adds. He is also confident of completing the Rs 10,000 crore expansion on time and become the country?s first 10 million tonne-a-year steel plant by 2010, ahead of its main domestic rival, Tata Steel.

The road less travelled

Today, when Jindal, a mechanical engineer by training, announces one mega plan after the other, nobody even bats an eyelid. But gaining this trust was not easy. From just a downstream facility at Vasind near Mumbai, it took 15 years of meticulous planning and an ability to tide over all the hurdles to achieve that.

Jindal took a path that nobody else dared to tread. Indira Gandhi laid the foundation stone in Vijayanagar to start a mega steel project in 1971 and even 25 years after that nothing happened. While most of the steel companies evaluated the project, they backed off due to lack of adequate facilities. Vijayanagar then was a barren land locked area with practically no road infrastructure, limited water availability, pathetic power position. What it did have, however, was iron sources within a radius of 10-20 km.

?So, we decided to use the disadvantages to our advantage,? says MVS Seshagiri Rao, director (finance) JSW Steel. As a first step, the company set up its hot strip mill, purchased slabs from the market and rolled them into coils. ?This not only allowed us to generate marginal profits but also establish our brand name and presence in the south,? says Rao.

What came next displayed Jindal?s ability to not only think out of the box but also take risks. To overcome the water shortage, the company adopted the Corex technology, invented by Austrian company Voest Alpine, for the first time in India and only the third country in the world. ?In Corex we could use low grade coal which could be directly fed into the furnace and we could generate electricity with the gases released,? says Rao.

What it had also undertaken was to set up two joint venture companies, Jindal Tractebel Power Comp Ltd and Jindal Praxair Oxygen Company Ltd. However, by the first quarter of 2000-01, the company started reporting profits, vindicating Jindal?s belief in the new technology. Meanwhile, the company set up a pellet plant in November 2000 and a second Corex unit in April 2001. So, instead of setting up an integrated steel plant from A to Z, the company chose to do it from Z to A.

But the journey was not without breaks. The technology was largely untested. The company faced a 10-month-long closure soon after its commissioning in September 1998 because of technical snags. The result? Staggering cost and time overruns. Originally planned to cost Rs 4,200 crore (the cost of the project had escalated by Rs 900 crore, since its inception in 1992), the 1.6-million tonne facility sucked in almost Rs 2,000 crore extra. What had deteriorated the situation further was that the steel industry was hit by the worst ever recession in the late nineties. All private steel companies including Jindal Vijayanagar Steel were under tremendous pressure due to mounting debts. The company went through a corporate debt restructuring (CDR). ?It was through our prudent financial management and our ability to look beyond the obvious that allowed us to come out of CDR (corporate debt restructuring) in September 2005, even when we had a total CDR debt of Rs 3,300 crore at the end of 2004-05,? says Rao. The decision to merge JISCO with Jindal Vijayanagar Steel in 2003-04 gave the company?s balance sheet the much needed strength.

Present perfect

Since 2006, the company has had a fabulous run. Robust steel prices riding on a steady rise in demand has seen the company increase its turnover almost three times from Rs 3,296 crore in 2003-04 to Rs 8,669 in 2006-07, and profits have jumped from Rs 529 crore to Rs 1,292 crore during the same period. For the half year ending September 30, 2007 profits jumped 82% at Rs 939 crore as against Rs 516 crore in the first half last year. The company has also managed to maintain its debt gearing at 1:1 and an EBIDTA margin of 33%. Today, it is also one of the most cost efficient players in steel despite lacking certain inherent advantages on the raw materials front that some of its competitors like SAIL and Tata Steel have.

The company is on a major expansion drive to set up crude steel manufacturing facilities across several locations in India. Apart from the 3 million tonne brownfield expansion at Vijayanagar, the company is also setting up a Rs 35,000 crore 10-million tonne plant in Midnapore, West Bengal, the land acquisition for which is nearly complete. In its first phase, 3 million tonne capacity will be set up at an estimated cost of Rs 10,000 crore. The company has also announced another Rs 35,000 crore, 10 million tonne project in Jharkhand, which it plans to set up simultaneously along with the West Bengal project. To overcome problems related to land acquisition, in Bengal, the company has come up with innovative means to offer shares of the company to land losers and plans to replicate the model for some of its other projects.

Earlier this year in August, JSW Steel has also acquired three companies based in the US?Jindal United Steel Corporation, Saw Pipes USA and Jindal Enterprises LLC at Baytown, Texas?for $940 million in a leveraged buyout (LBO) deal from elder brother P R Jindal?s flagship, Jindal Saw.

?We sell a lot of surplus slabs in the market, we will now directly export them to the US, add value ourselves, and avail increased margins on the finished products,? says Rao. Pipes command a price of $1,600, whereas slabs are sold at $520, even if you account for transportation and conversion of another $500, the margin is still attractive. ?This is in line with our strategy to make basic steel in India and add value in developed markets,? said Jindal.

Future Fears

For a group that is looking at bulk materials as its primary line of business, one of the chief concerns are raw material linkages?iron ore and coal. ?We want to have 50% of our iron ore requirement from captive mines and we are making good progress in this regard both, in Karnataka and Jharkhand,? says Rao. JSW Energy is also looking to acquire coal blocks in Indonesia and Australia. ?It is currently the biggest challenge for the group and we are directing a lot of our efforts in ensuring that raw materials do not hinder our growth path,? says N K Jain, vice-chairman, JSW Energy.

The company is also investing around Rs 850 crore to set up a beneficiation plant adjacent to its Bellary steel unit. The project is expected to be commissioned fully by 2010.

Given that India?s per capita steel consumption at 39 kg is lower than the global average of 150 kg, domestic demand is estimated to be robust in the coming years and what that means for the group is nothing but a steeled future.