The Naveen Jindal-promoted Jindal Steel & Power (JSPL), which has reported losses for the past four quarters, has reduced employee salaries by 10% in order to reduce cost
The Naveen Jindal-promoted Jindal Steel & Power (JSPL), which has reported losses for the past four quarters, has reduced employee salaries by 10% in order to reduce cost. Moreover, the salary disbursements to employees are also being delayed, multiple sources told FE.
Confirming the development, a JSPL spokesperson said employees voluntarily recommended giving up 25% of their respective take-home pay. “The senior management was overwhelmed by their austerity suggestions and accepted the token gesture to bolster the company’s stance against the challenges faced, albeit a 10% contribution by way of a waiver was accepted from all employees as an interim measure, with the exception of workmen,” the spokesperson explained.
The steel-power firm has been reducing its employee costs in FY16. Wages and employee benefits have reduced by 7.6% at Rs 254 crore during July-September 2015 against Rs 275 crore in April-June 2015. JSPL had total debt of Rs 42,534 crore as on September 30, 2015, of which the net debt stands at Rs 42,216.5 crore, data from Bloomberg show.
Over the last few years, JSPL’s net debt has nearly tripled as it embarked to double steel capacity, treble power capacity and backward integrate into mining outside India.
Whereas the facilities are now largely commissioned, JSPL finds itself short of coal (cancelled by Supreme Court), iron ore (Sarda mines in litigation), and steel-power demand (world steel industry oversupplied and no evacuation capacity in power) — all at a time when its debt-to-equity ratio has almost reached two times. In the last rounds of coal blocks auction, JSPL bagged two blocks — Gare Palma IV/2&3 and Tara. However, the blocks were later withdrawn by the government citing lower realisation in the auction compared to similar blocks.
“Over the last year, JSPL business has seen significant challenges. From being an integrated steel and power utility, owing to changes in various legislations, it went on to become a business with very little control over its raw materials. Several court cases ensued, some of which are still pending,” said a note by HSBC Securities and Capital Markets.
“At this moment we are not going for any expansion. The idea is to fully utilise assets we have built up. So no expansion at this moment and no capital expenditure for a while,” JSPL managing director and CEO Ravi Uppal was quoted as saying by PTI on Thursday.
The JSPL spokesperson said, “Employees form the core of the JSPL stakeholder ecosystem, and have quintessentially contributed to the success of JSPL over the years. The organisation in turn has nurtured and enlarged the competencies of all human resources and inculcated a spirit of ownership of the business.”