JSW Steel looks for stressed assets in India & overseas, for its 50 mtpa target

11 june 2018

After the successful acquisition of Italy’s Aferpi, and the winning bid for Monnet Ispat in the domestic market, Sajjan Jindal-led JSW Steel is looking for more distressed assets in India and overseas.

This is part of the company’s larger roadmap to reach 50 million tons in annual capacity by 2030.

“The plan is to have 40 million tons of capacity in India, and the rest overseas,” a senior official told Moneycontrol.

JSW Steel signed up the deal to buy Aferpi last month, adding two million tons to its total capacity. At Rs 441 crore, the company’s facilities that supply specialised steel to the auto industry have come cheap.

In March, JSW Steel acquired  US-based Acero Junction Holding, whose facility – including a 3 million ton hot strip mill – makes steel that are used in white goods and auto industries. Analysts valued the acquisition at $155 EV/ton, much cheaper than what the company would incur otherwise in setting up a similar facility.

The acquisition will add to JSW’s plates and pipes making assets in the US. Located in Texas, the facility is being expanded and will now include a steelmaking unit with a capacity of one million tons a year.

A source in the industry added that the company is evaluating more distressed assets in the US and Europe. “Talks are on with another steel company in Europe,” said the executive.

Financial rational

“The strategy to look for such assets is because the company don’t want to buy assets at higher value, which would eventually stretch the balance sheet,” said the senior executive cited above.

The steelmaker’s debt to EBITDA ratio stands at 2.75, and the company wants to keep it below 3. And net debt to equity ratio is 1.38.

The company’s net debt reduced to Rs 38,019 crore as on March 31, 2018, from Rs 42,068 crore in December 31, 2017.

“With a distressed asset, funding doesn’t become an issue,” added the executive.

That was one of the reason the company stepped away from the auction of Bhushan Steel and Bhushan Power & Steel, both of whom were referred to insolvency courts.

In Bhushan Steel, JSW Steel’s bid of Rs 29,700 crore was topped by Tata Steel’s at over Rs 35,000 crore.

On the other hand, for Bhushan Power & Steel, JSW Steel bid about Rs 13,000 crore, against Tata Steel’s Rs 24,500 crore. UK’s Liberty House has now put in a bid higher than Tata Steel’s.

The Jindal company is now instead focusing on Usha Martin’s specialty steel business, which has been put on the block. The unit is backed by captive iron ore and coal mines. Vedanta Resources is also said to be interested in the asset.

JSW Steel, which at present has a capacity of 18.1 million tons in India, plans to increase its capacity by nearly 40 percent in two years, taking its volume to 24.7 million tons by 2020.

The company’s capacity could even reach the 40-million-ton mark in another three years, as it plans to further expand capacity at its facilities at Vijayanagar in Karnataka, and has drawn up a plan to set up a new facility in Odisha.


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