Proving His Mettle

JSW Steel, a part of the diversified JSW Group, has been on a roll. In the just-concluded fiscal (FY18), the company reported a 76% year-on-year rise in net profit to Rs.61 billion on the back of 18% growth in turnover to Rs.715 billion. In fact, operating margins rose to nine‐year high level of Rs.11,100/tonne and analysts expect the momentum to sustain given the structural withdrawal of Chinese supplies, following a clampdown on pollution in the Asian region. Importantly, the company’s net debt fell by Rs.35.29 billion during the year, resulting in a D/E of 1.27x, even as it improved its RoCE to 16.4%.

Looking at the growing domestic demand, the company has also decided to invest an additional Rs.176 billion for increasing its capacity to 24.7 million tonne per annum (mtpa) by 2020. Thus, the company is on course to invest a cumulative sum of Rs.444 billion by March 2020. The optimism is driven by the fact that domestic steel consumption is expected to grow by 7-7.5% in the current fiscal on the back of government push for infrastructure projects and strengthening consumer demand.

Not surprising that the stock has done well during the fiscal, gaining 53% against 23% for the benchmark Sensex. Year-till-date, the stock is up 14.22% against 7.5% gain in the Sensex. In an indication that the management believes that good times are in store, chairman and managing director Sajjan Jindal purchased 3.18 million shares in three instalments between July 5 and July 13, 2018 through promoter entity, JSW Techno Projects Management. In doing so, the entity’s holding increased from 9.49% to 9.62%. The overall promoter holding as of June 2018 stood at 41.75%

Besides the domestic market, JSW has also stepped its presence in the global market by acquiring Aferpi in Italy, where it will invest $63.8 million and Acero Junction in the US, where it will invest $1 billion in two phases. The domestic organic expansion is also an outcome of the company lost two bids: Bhushan Steel to Tata Steel and Bhushan Power to UK-based Liberty. This led to the company revamping its strategy whereby it decided to concentrate on acquiring smaller steel plants worldwide that produce specialised products. The company has also restarted its coking coal mining in West Virgina, USA due to a rise in coking coal prices.