Covid delays hit JSW Steel expansion plans

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Published: July 3, 2020 12:01 AM

The company will also be taking shareholders’approval for raising non-convertible debentures with warrants convertible into or exchangeable with equity shares of the company for an amount not exceeding Rs 7,000 crore.

The company will also be taking shareholders’approval for raising non-convertible debentures with warrants convertible into or exchangeable with equity shares.

The Covid-19 pandemic has pushed the commissioning timelines of several ongoing expansion plans at JSW Steel, the company said in its annual report for the year 2019-2020. Non-availability of required manpower and material due to the lockdown announced by the government and its subsequent extensions have severely constrained project activity at various sites, JSW Steel chairman and MD Sajjan Jindal wrote to shareholders.

He said at Dolvi Works, the company received permission to restart activities towards the end of April 2020, which enabled it to ramp up the existing operations. However, progress on the 5 MTPA expansion project was hampered as a number of workers employed by the contractors began to head home, with low visibility of when this trend is likely to reverse. Further, non-availability of foreign experts from technology and equipment suppliers due to international travel restrictions is also impacting the commissioning schedule.

“The expansion of crude steel capacity at Dolvi Works from 5 MTPA to 10 MTPA, along with the captive power plant and coke oven plant, is likely to get delayed into the second half of FY21,” Jindal said. He added that the 8 MTPA pellet plant and the wire rod mill at Vijayanagar are expected to be commissioned by mid-FY21. The downstream modernisation and capacity enhancement projects in Vasind and Tarapur and the colour-coating plant at Kalmeshwar are now expected to be commissioned in the second half of FY20-21.

As a result, the company has reduced its capex for the year. “We thus reduced our planned capex on all these projects to Rs 8,200 crore for the year. Combined with the spend earmarked to operationalise the iron ore mines, our total planned capex for FY20-21 stands at about Rs 9,000 crore,” Jindal said.

He further said the company is taking several steps like adoption of technological tool and digitalisation initiatives with the aim to cut fixed costs by 10-15% which will aid in preserving and enhancing margins. The pandemic has also led to a drop in sales and a subsequent inventory build-up, which has kept the net debt at elevated levels of about Rs 53,000 crore at the end of March 2020, the CMD said.

However, he said the core leverage for the current 18 MTPA capacity is about `35,000 crore. “As some of these projects get progressively commissioned during FY20-21 and start generating returns, it will set in motion a natural deleveraging process in the next year ie FY21-22,” Jindal added.

In addition, he highlighted that in FY20, the company achieved raw material security of iron ore. It emerged as a preferred bidder for four iron ore mines in Odisha and additional three mines in Karnataka, with aggregate reserves of close to 1.2 billion tonne. “These mines give strategic long-term raw material security and access to high quality reserves,” he said.

The company will also be taking shareholders’approval for raising non-convertible debentures with warrants convertible into or exchangeable with equity shares of the company for an amount not exceeding Rs 7,000 crore.
Also, equity shares and/or convertible securities (other than warrants) for an amount not exceeding Rs 7,000 crore to qualified institutional buyers by way of a qualified institutions placement.

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