Jindal Steel and Power Ltd (JSPL) expects to pare debt and meet its carbon emission goals with the divestment of its entire stake in its thermal power unit to Worldone Pvt. Ltd, a promoter group company. JSPL’s managing director V.R. Sharma said the sale of its 96.42% stake in Jindal Power Ltd for ₹7,401 crore would bolster the company’s balance sheet as it will help retire ₹3,000 crore worth of debt. Edited excerpts from an interview:
Do you see the current boom in the steel industry continuing?
The industry is seeing buoyancy in terms of profitability and demand. And the demand will be there worldwide. Prices though may go down or remain stable. Different governments in the world have declared stimulus packages of around $17 trillion to be spent on infra projects in three years. Of these infra projects, each year, we get about $5-6 trillion of spending and of this, the steel industry would see around $1-1.5 trillion coming in as 70% of steel demand is always supported by government projects, driving the economy in terms of growth. So the demand boom, we do see continuing.
And how does JSPL plan to cash in on this demand increase?
Steel is a business wherein overnight we can’t increase the capacity. In the past two years, we have grown from 5.5 million tonnes per annum (mtpa) to 7.5mtpa. And we intend to grow to 8.5mtpa this fiscal. We want to put up a plant and draw a capex of ₹18,000 crore to increase capacity to around 14mtpa by 2023. The country is slated to grow from existing 110mtpa to 300mtpa. So the gap would be 190 million tonnes. Who will bridge this gap? There are only five major players in India today who produce about 55mtpa steel. This 55mtpa is 50% of the total steel what we are producing in the country. So, we are planning our expansion. In nearly a decade, we would take our capacity to 50mtpa.
Will your expansion plans add to your debt?
In 2016, we had a debt of ₹45,000 crore. Today we have a debt of ₹13,000 crore and in the next few months that will come down further by ₹3,000-4,000 crore. We will be having an opening debt of ₹9,000 crore in FY22. Our aim is to bring it further down. We don’t think we are under a threat with regard to debt at any point of time.
Why is JSPL exiting the power business?
When we have the thermal power plants and we look at our consolidated balance sheet, the total coal consumption becomes very high. Then our CO2 emissions per tonne of making steel goes to over 2.8 tonne of CO2 for per tonne of making steel. This is too big a figure. We want to bring it on par with the world’s best plants who are at a level of about 1.85 to 1.9 per tonne of steel. That is why we began looking for someone who could buy our power assets. But despite our best efforts, we could not find a suitor. Our promoter company, Worldone Pvt. agreed to buy this. When this company becomes an independent entity, JSPL’s balance sheet would be a healthy one in terms of our ESG norms addressing the CO2 emissions. The proceeds from the sale would be used to pay off debts of ₹3,000 crore.
You are also setting up a container business. Why?
The world is facing a container shortage and so is India. So we decided we will make containers in our plant in Odisha. The technology is almost finalized, and we are going to be in production by the end of this fiscal. To begin with, we would be churning out 15,000 containers per year. Though this can’t solve the container shortage problem, it will certainly give respite to the Indian industry.