Naveen Jindal, Chairman, Jindal Steel & Power Ltd.
JINDAL STEEL & POWER LTD.
J indal Steel and Power (JSPL) is close to acquiring an iron ore mine in West Africa to secure raw material for its recently commissioned steel plant in Oman and to sell the surplus in the open market. “We are in discussion with a few targets in West African countries like Cameroon, Senegal and Nigeria for an iron ore mine acquisition and hope to clinch a deal in the next three-four months,” a senior company official told PTI. Though the cost of the acquisition would not be “much”, creating infrastructure such as roads and ports while developing the mine would be “higher” and quantifying that would be possible later, he said. “By July-September, we will be able to seal the deal,” the official said, adding that the mine would have at least 1 billion tonnes of reserves. Naveen Jindal-led JSPL recently commissioned a 2-million per annum (mtpa) steel plant in Oman, taking its total capacity to 7 mtpa. It has a 3 mtpa steel plant at Raigarh in Chhattisgarh and a 2 mtpa facility at Angul in Odisha. It generally requires 1.6 million tonnes of iron ore to produce 1 million tonnes of steel. The Oman facility buys the raw material from the open market to run the plant. Operating a plant with raw material purchased from the market leaves a company vulnerable to price vagaries, which can impede growth and affect profitability. “We want to buy a mine so that the plant does not have to face the consequence of fluctuating iron ore prices in the international market. It is very important for us,” he said. Africa has natural resources in abundance. JSPL already has established its presence across South Africa, Mozambique, Namibia, Botswana and Mauritania on the continent
Jindal Steel Seeks Shareholder Nod to Raise up toRs. 10,000 Crore via NCDs
Jindal Steel and Power Ltd (JSPL) will seek shareholder approval to raise up to Rs. 10,000 crore by issuing non- convertible debentures (NCDs) on a private placement basis. NCDs are a secured debt instrument and offer high returns with moderate risk. They cannot be converted into shares. In a communique to the BSE, the steel maker said its board also approved seeking shareholders’ nod through postal ballot to increase the company’s borrowing limit to Rs. 50,000 crore and for giving loans or guarantees, providing securities and making of investments in securities up to Rs. 20,000 crore. The company would seek approval for proposals to enhance the strength of the board to 18 from 13 now and appointment of K Rajagopal, group chief financial officer and director, as whole-time director. JSPL has fixed June 5 as the date for completion of dispatch of notice along with the postal ballot form to shareholders. The result of the ballot will be declared on July 9.
Metal Stocks Extend Gains to Fifth Day
Metals stocks rose sharply over the past week with Tata Steeljumping over 15 per cent. JSPL and state-run miner NMDC clocked over 10 per cent gains while Hindalco and Sesa Sterlite jumped over 7 per cent each. (Track Metal Stocks) In comparison, the Nifty gained nearly 2 per cent over this period. Positive outlook on Indian economy, dip in raw material prices and good China factory data helped the metal stocks to sharply outperform the broader markets, say analysts. The strong mandate for the Narendra Modi government has spurred hopes
that the Indian economy has bottomed out and it could successfully restart the investment cycle. Sentiment was also supported after the Reserve Bank of India on Tuesday eased rules to spur bank lending and toned down its inflation rhetoric in moves set to be welcomed by a new pro-business government determined to revive economic growth. Analysts say that the steel sector is also poised to turn the corner. Brokerage firm Nirmal Bang had been negative on the ferrous sector for three years on factors like “subdued steel demand globally and slowdown in local demand”. Currently, according to Nirmal Bang, international steel prices and raw material prices like iron ore are hovering around fouryear low. But now Nirmal Bang expects international steel prices to stabilize as “we don’t expect a sustained fall in raw material prices as they have declined to a level where a large portion of Chinese supply is likely to remain unviable portion of Chinese supply is likely to remain unviable.” Also, contributing to the positive outlook for steel sector, China’s factory sector turned in its best performance in four months in May as export orders improved although activity still contracted, a private survey showed, adding to signs the economy may be stabilising. In today’s trade, the BSE metal index rose nearly 2.5 per cent to outperform a flat Mumbai market, extending gains to the fifth day. Sesa Sterlite was up over 6 per cent to be the biggest gainer among Nifty stocks. JSPL and Tata Steel were up over 2 per cent each.
Govt acted fast in restarting operations in 9 mines: JSPL
The state government realised the importance of resuming the mine operation because their own revenues got affected if the mines remain suspended, says Ravi Uppal. The Supreme Court on May 16 suspended the operation of about 26 mines due to pending renewal of extraction leases from the state government. Speaking to CNBCTV18, Ravi Uppal, MD and CEO, JSPL says the Odisha government has acted quite swiftly in the last couple of days and the leases of about nine mines have been renewed. “Tata companies and the SAIL will be recovering and will resume the normal supply of iron ore. However, for the rest of the mines, the balance 17-18 mines, the case is under review by the state government and they have a time of about six months,” he elaborates. Also Read: Mining ban by SC in Odisha a concern: Kalyani Steel Uppal further says that the state government realised the importance of resuming the mine operation because their own revenues got affected if the mines remain suspended. “Therefore, the state government will try to take a decision with regards to renewal of leases very soon and once the mines resume their operation, the kind of shortage that we witness in the market should get corrected,” he adds. Below is the verbatim transcript of Ravi Uppal’s interview with Ekta Batra and Anuj Singhal on CNBCTV18. Anuj: What is the status from Odisha because there are reports of an interim ban from Supreme Court and you source most of your requirements from Odisha, so what is the on ground situation and how has that impacted you over the last two weeks or so? A: The Supreme Court has suspended the operation of about 26 mines and some of these mines belong to the people who were manufacturing based on the iron ore. But in the last couple of days the state government has acted quite swiftly and leases of about nine projects have been renewed. To that extent, the Tatas as well as the SAIL will be recovering and they will resume the normal supply of iron ore. However, for the rest of the mines, the balance 17-18 mines, the case is under review by the state government and they have a time of about six months. The state government realised the importance of resuming the mining operation because their own revenue
earnings got affected if the mines remain in suspension. Therefore, I am inclined to believe that the state government will try to take a decision with regards to renewal of leases very soon and once the mines resume their operation, the kind of shortage that we witness in the market should get corrected. So there has been a temporary setback in the last two weeks but it should gradually lift back to normalcy. Ekta: Can you give us a status update on the Sarda iron ore mine with regards to the environmental clearance that it is currently seeking? What would JSPL’s current inventory status be? A: Sarda mine has already got the clearance from the export committee and it was publicly announced. It is waiting for a formal communication on the environmental clearance, which should happen in the next week or two. Ekta: What about your inventory situation? How much inventory do you currently have and how long it might last? A: We have sufficient inventory of the fines and the lumps at the moment and should see for the next month or two. Our Tensa mine continues to operate, so we continue to get support from Tensa mine which is producing both lumps as well as the fines. Anuj: Steel has been doing betterthan-expected for the last two-three quarters for companies like yours. Is that trend likely to continue in FY15 as well? A: There are two sides to it. One, there has been some shortage in the market of the fines because the prices of raw materials have gone up in the Indian market and consequently the prices of long products like TMT Rebars and the wire rods have gone up. Some of the HR coil prices have also gone up but same cannot be said for all the products across the board. There is a surge in demand and generally the prices of all the commodities in the steel range should look up because last year, the prices have been reining very low and there is no headroom for the prices to improve. Therefore, whole thing will depend as to what the government policy framework now is and what are the Budget proposals and what is the kind of momentum it lends to the infrastructure sector. The fortunes of steel sector are very much linked to the growth of infrastructure and automotive sector. Both of them must look up because they have already touched their lowest point and can only go up. So, the kind of activity and the demand that we have seen for long products like TMT and the wire rod, I hope same kind of thing could be witnessed for other products as well in the weeks and
months to come. Ekta: Focusing back on the impact that Odisha mining ban has possibly had on sponge and palette prices, how much of a hike has one seen in the sponge and palette prices since the ban came into effect? A: The market has been in turbulence and in state of transition because the mines activity was suspended suddenly. The prices of palette touched Rs 8,800-9,000 and like wise the sponge prices also went up to Rs 22,000-23,000 but since the resumption of Tata and SAIL mines has taken place, I think prices are softening. It remains to be seen as to where they touch and that is something we will get to see in the next week or so.