JINDAL STEEL & POWER ON RECOVERY PATH AMID INSOLVENCY TURMOIL IN SECTOR
Naveen Jindal-promoted Jindal Steel & Power (JSPL) is looking at a recovery after paying back over ~10,000 crore in interest and
~6,000 crore in principal to its lenders since 2014. This is at a time when steel firms, barring three majors, are in a troubled phase. Since the beginning of 2016, JSPL sold a series of assets and increased its production capacity. “While other companies are with the National Company Law Tribunal for insolvency proceedings, we are looking forward to be out of the joint lenders’ forum (that oversees stressed banking assets),”
Naveen Jindal-promoted Jindal Steel and Power Ltd (JSPL) is looking at a recovery after paying back more than ~10,000 crore in interest and ~6,000 crore in principal to its lenders since 2014. This is at a time when steel firms, barring the three majors, are in a troubled phase.
Since the beginning of 2016, JSPL sold a series of assets and increased its production capacity. “While other companies are with the National Company Law Tribunal for insolvency proceedings, we are looking forward to be out of the joint lenders’ forum (that oversees stressed banking assets),” Jindal said in an interview to Business Standard.
Lenders to Bhushan Steel, Monnet Ispat and Essar Steel have commenced insolvency proceedings against the companies after a Reserve Bank of India directive identified 12 accounts that together accounted for about 25 per cent of the gross non-performing assets (NPAs) of the banking system.
Jindal said the company would now focus on sweating assets without major investment in new projects. Large scale expansion to increase steel and power generation capacities by three times and 2.5 times, respectively, had seen the company debt increase manifold at a time when the business cycle for steel turned unfavourable and the company saw de-allocation of its captive coal blocks. A retrospective levy of ~3,300 crore on coal production was funded through debt. At the same time, the merchant power market fell to ~2 a kilowatt per hour levels.
Last week, the company announced the sale of its oxygen plant assets at Raigarh (Chhattisgarh) and Angul (Odisha) steel units for ~1,121 crore to SREI Equipment Finance Ltd. The deal came along with a lease-back agreement for continued operations of the assets by JSPL for manufacturing of steel at the respective plants. A large part of the sale proceeds went into paying back debt. The company is aiming to be debtfree by 2020. At present, JSPL’s consolidated debt stands at ~45,500 crore, with the largest chunk of ~24,000 crore for the domestic steel business, ~8,500 crore for power business and ~12,400 crore for global business.
Jindal said government policy decisions such as minimum import price, anti-dumping and safeguard duties helped the industry to recover. Besides, the roll-out of goods and service tax (GST) was beneficial for the industry. “With GST, the tax structure is simplified. There was pain during the initial 15 days, but now GST is helping us,” he said. JSPL made a turnaround at its Angul steel plant after the commissioning of blast furnace in August. This led to a cost reduction and full production is expected by the end of December.
JSPL reduced its operational costs and working capital significantly during 2015-16 and 2016-17. Without taking any additional debt in FY17, it commissioned a 4-mt blast furnace. It also undertook a host of operational efficiency measures like converting electric arc furnaces to new electric oxygen furnaces. In 2016-17, the firm clocked a record revenue of ~22,696 crore, backed by its highest-ever steel production at 4.8 mt.
The company’s export revenue grew to ~3,138 crore, up by 340 per cent over the previous financial year. JSPL recorded earnings before interest, taxes, depreciation and amortisation (Ebitda) margins of 21 per cent, translating to ~4,658 crore, during FY17. Its revenues and Ebitda during Q1 of FY18 stood at ~6,127 crore and ~1,353 crore, respectively. The firm narrowed its losses to ~421 crore in the three months ended June, against a loss of ~1,240 crore in the same period last year. JSPL operates integrated steel plants of 6 mtpa at Angul, 3.6 mtpa at Raigarh and 2 mtpa at Sohar (Oman). It also has long and flat finished steelmaking capacity of 8 mtpa. The firm operates the country’s largest 9 mtpa pelletisation complex at Barbil (Odisha).
The power generation capacities of 5050 Mw includes the J ind al Power Ltd’ s 3400 Mw OP Jindal Super Thermal Power Plant at Tamnar (Chhattisgarh) and captive power generation capacities of 1650 Mw at Chhattisgarh and Odisha. It has 3.11 mtpa iron ore mine in India (Odis ha) and 6.2 mt pa coal mine sin South Australia and Mozambique.
“With GST, the tax structure is simplified. There was pain during the initial 15 days, but now GST is helping us”