In times when scions of Indian business houses are opting for more glamorous ventures like telecom, tech and finance, Parth Jindal, the only son of JSW Group chairman Sajjan Jindal, is treading his family’s path. His grandfather OP Jindal founded the Jindal Group of companies with interest in steel and power. His father Sajjan Jindal expanded the integrated steel business under JSW Steel. The 27-year-old heir to the JSW Group is the managing director of JSW Cement and is well set to start a new business with JSW Paints — in line with providing end-to-end solutions to the construction needs of the industrial and housing sector. Jindal tells Shubhra Tandon in an interview that he is convinced of the strengths of the JSW Group in manufacturing, and even though is he looking to support some tech start-ups through JSW Ventures, the focus, he says will be on manufacturing. Excerpts:
You have been called an ‘agent of change’ in the JSW Group in media reports. Feels good?
Well, it feels good to be back in India. At such a young age very few people get the opportunity to run a company, so trying to make the most of it. Also, there are a lot of lessons I had during my work experiences abroad as well as studying, so trying to bring some of those things back to the group. Although my functions in the group are limited to mostly HR and IT, other than that I am very focussed on my businesses which are cement and paints. And yes, I am extremely passionate about sports, so that comes from the heart.
Most people around you who are going to eventually head business empires are working something around digital. What has kept you from giving into that temptation?
We as a group understand our strengths and our weaknesses too. We want to play to our strengths. Our major strength is in manufacturing and that is what we are good at. We are very good at bringing global best practices to India and providing cost advantage of being in India to an end customer. That is what we pride ourselves in and when you look at the industries we are in, we see huge amount of growth possible in those industries. In businesses like cement too, we have huge synergies with steel — in terms of raw materials and distribution. We are now getting into paints, so there is a link with steel and cement in terms of the distribution of the product, as well as the usage. You need steel to build a home, you need cement to build a home, you need to paint the home. So, that synergy is what we are going after.
You have also started JSW Ventures, which is investing in technology driven start-ups…
Yes, the reason I started the venture fund was to primarily invest in tech start-ups because going and building a tech company on our own is not our forte, it is not in our DNA. So we are investing and promoting technology companies. If at some stage any of these investments make for a good strategic fit with the group, perhaps acquire them. However, the idea is that if we can’t do it, let’s not lose out on it, let’s invest in some of them who are building these companies.
What are the future plans for JSW Ventures?
It is only a Rs 100-crore fund as of now, and the idea is to invest it in 15-20 companies over three years. Based on the track record of our investments, we would look at going and raising a secondary round of investments from institutional investors. There, the Jindal family will be the anchor investor and we would raise funds from other institutional investors and make this as a separate arm of the group. That’s the vision we started investing last year. This fund would run out by 2019, and then we hope to raise somewhere close to the $100-million mark to make this fund bigger. We are trying to build a portfolio of strong companies, which can benefit from our group’s management and presence. We have invested so far in four companies and we hold anywhere between 5% and 10% stake in these companies and we get involved at the board level in managing these companies.
Coming to cement, surviving cost pressures is a key challenge, especially when demand recovery is taking longer than expected. What would be your strategy to grow profitably in this scenario?
Cement is all about distribution and pricing. The further you go, the more you use your dealers and the more you use godowns, that is where the costs start piling. So, our strategy is to maximise our market share in those regions which are surrounding our plant area. We want to maximise our direct dispatches so even if we are going to different states, now with GST we can still go directly to the end consumer. Secondly, we want to be efficient in terms of our consumption, whether power, or clinker, or fuel. We have taken a lot of steps to initiate alternate fuel instead of using coal. We are reducing our dependence on intermediate warehouses by promoting direct delivery to the customer. Also, we have always faced the perception issue in south India which has been a PPC-dominated cement market, whereas we are a slag-based cement and our pricing has always been lower than PPC. Currently, PPC cement commands anywhere between Rs 25 and Rs 30 per bag higher than us. Over the last two years we have been able to bridge this gap from Rs 30 to Rs 20 and we are trying to take this gap to zero. So, that would again add to our topline and bottomline.
How has JSW Cement’s financial performance been and what are the plans with Shiva Cement?
The gross revenues in FY17 was Rs 1,800 crore and in FY18, we are at a run rate of close to Rs 2,200 crore. Ebitda (earnings before interest, tax depreciation and amortisation) was Rs 400 crore and we could close the current year at about Rs 550 crore. The profit after tax (PAT) stood at Rs 110 crore at the end of FY17, our target is to close the year with Rs 180 crore. The plan with Shiva is to keep it listed and post the JSW Cement IPO to merge the two companies. Shiva has limestone reserves of roughly 50 million tonnes and the idea there is that we will produce the clinker at Shiva and transfer that to service the Jajpur and the Salboni grinding unit.
What valuations are you looking at for the JSW Cement IPO?
We will talk about it closer to the launch, which will be towards the end of 2019 once we reach the target of 20 MTPA capacity and capacity utilisation of over 75%.
Have the plans for JSW Paints been firmed up?
Yes, we have already commenced construction on both our units — decorative line in Vijayanagar and industrial line in Vasind. It is a total of Rs 1,000-crore investment. We are going to have a capacity of 250,000 KLPA, 200,000 on the decorative side and 50,000 on the industrial side. We hope to commission between August and September of next year.