‘We will more than halve debt in a couple of years’

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November 5, 2020 8:33 AM

In a recent report, HSBC said, “Jindal Steel and Power is our only Buy in the India steel sector.” JSPL’s chairman Naveen Jindal narrates the last five-six years’ journey and days ahead with Financial Express’ Surya Sarathi Ray. Excerpts:

JSPL’s chairman Naveen Jindal

In a recent report, HSBC said, “Jindal Steel and Power is our only Buy in the India steel sector.” JSPL’s chairman Naveen Jindal narrates the last five-six years’ journey and days ahead with Financial Express’ Surya Sarathi Ray. Excerpts:

From being on the verge of referring to the insolvency court to among the best steel firms in the country, how has the journey been in the last 5-6 years?

There have been challenges but given our DNA of thinking big, quick, and in the national interest, we have tried to convert every crisis into a meaningful opportunity. Everyone is aware of the slowdown, and then Covid-19-induced recession and disruptions. We have been one of the few players who have seen a growth in sales and production even in this extremely challenging period. Today, we are a far more resilient corporate and stronger than ever before.

Given our portfolio of export commitments, and the demand surge that we see in the domestic market, Jindal Steel and Power (JSPL) growth story will only get better and bigger, in keeping with India’s ambitious growth goals.

What is in store for the next couple of years, especially in the light of the economic slowdown?

As I explained earlier, JSPL continued with its growth momentum even in the lockdown period. This was driven primarily by the export markets where we sensed an opportunity in a period when the domestic markets were closed. Exports have further added a new channel of sales for JSPL, especially during times when domestic demand is down during monsoons or other unforeseen situations.

We expect an increase in the steel domestic demand going forward and we are fully geared to produce 20% more steel in the current year.

India needs to grow in sectors like infrastructure and defence. The other key sectors require steel as a major component, and we aim to be an important contributor to those sectors. With India and the world learning to live with the Covid-19 and continue doing business, we do hope that things will only get better.

What is JSPL’s net debt at the group level now? By the end of next fiscal, how do you plan to reduce the debt and to what level?

JSPL has run with a singular focus on reducing its leverage over the last few years. In the last three years, we have paid down over Rs 10,000 crore debt and continue to bring it down. At the beginning of the year, we had a debt of around Rs 35,000 crore, down 26% from its peak level of Rs 47,000 crore in 2016-17.

In the first quarter, the net debt reduction was around Rs 1,300 crore (on a constant currency basis). We are aiming to bring down our total debt to Rs 15,000 crore in the next couple of years. Among the measures taken, we have optimised production and focused on bringing cost efficiencies, among other measures.

You spoke earlier about selling non-core assets. What are they and how much do you plan to garner from exiting such sales?

We are focusing on our India operations, as we feel that in the current domestic and global economic environment, we must single-mindedly work towards Atmanirbhar Bharat and a strong and prosperous nation.

To support our deleveraging goal, we have already divested the Oman Steel Business and are evaluating other opportunities for divestment.

JSPL seems to be more focused on consolidation rather than expansion. How long will you continue with this strategy?

Yes, it’s true that in the foreseeable future we wish to focus on our operations in India by utilising capacities and rationalising costs to maximise the returns for our stakeholders and to be a net-debt free company.

The vision is to remain within certain constraints of net debt to Ebitda even when we think of growing or expanding capacities. It could also be purely on the money we earn and not by taking on any debt.

The government is of the view that the steel industry should stand on its own feet. Do you think this is justified or should the government support the industry?

I would say that the steel industry is already standing on its own feet only. The government has also supported wherever required. Classification of the steel industry as an essential service by the government during the pandemic helped to continue running operations.

There could be some more measures which the government can use to further boost steel manufacturing in the country. One could be providing access to adequate raw materials and another being towards streamlining various statutory approvals to further enable ease of doing business.

What is your view on steel demand and price in the near term?

Even during the domestic lockdown period, we did well as we focused on exports. Other Indian players have also looked at overseas markets.

Now, as we come out of a global recession, there would be increased economic activity worldwide. The demand, thus, will only increase and will sustain.

Similarly, in the domestic markets too, infrastructure is expected to be given a major boost. With newer projects, investments in housing, and other economic activities, steel demand is set to go upwards.

The per capita consumption of steel in India is around 75 kg compared to the world’s average consumption of around 230 kg; hence, there is a huge potential for the domestic demand to grow going forward. We believe with the growing urbanization, and the need for Metro rails, there would be a big demand for head-hardened rails. We are the first Indian company to manufacture head hardened rails in India and are supplying the product to various Metros.

We also see a big boom in defence requirements. With the growing modernisation and indigenisation focus, the production of armoured vehicles, ships, helicopters, etc should get a boost, and we will, like always, be there to do our bit in the national mission to become self-reliant.

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