JSW’s Man Of Steel

JSW GROUP CHAIRMAN Sajjan Jindal has a high risk appetite. JSW Steel faced contrasting outcomes when the steel cycle slipped thrice in the past three decades. In the 1990s, when young Jindal was building a brand new steel plant at Vijayanagar, Karnataka, with the still unproven Corex technology, the industry demand hit a trough. The company defaulted on loans, and took five years to come out of corporate debt restructuring.

The second time when the sector crashed, post the global financial downturn in 2008, JSW Steel was financially sound and acquired sick assets, including Ispat Industries and Welspun Maxsteel.

When Essar Steel, Bhushan Steel, Bhushan Power and Steel (BPSL), among others, filed for bankruptcy in 2007, JSW Steel went for the prowl again. It acquired BPSL for ₹19,350 crore, and along with Aion Investment, took over Monnet Ispat and Energy for ₹2,875 crore.

But then, Sajjan Jindal has encountered many headwinds during a four decade-long journey in steelmaking, sailed through loan default, commodity crisis, pandemics and war.

“There is something which is beyond our control. I only think about what is in my control,” says Jindal. Runaway inflation, the Russia-Ukraine war and supply chain disruptions amid the pandemic had troubled JSW Steel. The tightening of central bank policies across the globe also had an adverse impact on steel demand, leading to a decline in prices. In the first half of FY23, elevated costs of raw materials and inputs weighed on margins. The government imposed duties on domestic steel exports in May 2022, which also affected profitability.

Amid all these, Jindal took a contrarian view. JSW Steel added 6.2MT capacity in the last two years in India, taking the total to 27.7MT. Capacity utilisation stood at 90% in FY23, and gross turnover increased 13.8% YoY to ₹1.64 lakh crore in FY23. Margins did come under pressure due to domestic and global headwinds. Operating EBITDA fell to 11.2% in FY23, from 26.6% in FY22.

The domestic steel industry grew 13.3% in FY23, with consumption touching 120MT. Jindal expects an incremental domestic demand of 8-10MT in FY24. He plans to add 9MT capacity, taking the total capacity in India to 37MT by FY25. In FY23 alone, JSW Steel introduced 125 new product grades. The company is also building an electrical steel manufacturing facility at Vijayanagar in JV with Japan’s JFE Steel. The country’s largest steelmaker has also outlined a capex plan of ₹50,000 crore over the next three years.

“Whatever businesses we will do would probably be capital intensive. That is our core strength,” Jindal told Fortune India during one of his recent interactions.

The company is on track to achieve its ambitious goal of reducing CO2 emissions intensity by 42% by 2030. “As we aim to reach a capacity of 50MT, the aspiration is to power the entire set-up through 10GW of renewable capacity,” says Jindal.

While renewable energy and hydrogen technology form a crucial part of the company’s decarbonisation strategy, Jindal knows that alone is not sufficient. He also plans to infuse green hydrogen into the iron plant at Vijayanagar to reduce emissions. “The production of primary steel relies on the utilisation of fossil fuels to convert iron ore into steel. To address this challenge, we have launched the sustainable energy environment and decarbonisation (SEED) project,” he says. SEED aims to reduce CO2 emissions by improving efficiency and changing the management approach.

The company has implemented Industry 4.0 — integrating new technologies — in the manufacturing process to improve operational efficiency. It has also issued a U.S. dollar-denominated sustainability-linked bond (SLB). The $500 million SLB, which has a tenure of 10.5 years, is linked to the firm’s CO2 reduction target.

Acquisitions & Expansion

The steelmaker recently acquired flat-steel producer National Steel and Agro Industries for ₹621 crore. In 2020, it bought Asian Colour Coated Ispat for ₹1,550 crore.

In brownfield expansion, JSW Steel commissioned a new 5MT capacity at its Dolvi plant last year. The expansion of Vijayanagar plant from 12MT to 19.5MT is underway. The steelmaker is setting up new colour-coating lines in Jammu and Kashmir and Rajpura, Punjab. It has also been selected as a preferred bidder for an iron ore mine in Maharashtra. It already operates nine mines in Karnataka and four in Odisha.

Jindal is now looking to expand his renewable energy business, besides entering into electric vehicle manufacturing. His son Parth, who heads the conglomerate’s cement, paints and sports businesses, told Fortune India in an earlier interaction that the group wants to grow double the pace at which India grows. “If India’s GDP is growing at 7-8%, we want the group to grow at 15-16%,” Parth said.

Amid slowdowns and recession fears in the developed world, India is the real bright spot, says Jindal. “The idea is to grow market share in the businesses we are in. China is producing over 50% of the world’s steel. India is going to become a large producer in the years to come,” he adds.

An avid squash and tennis player, Jindal is currently focusing on the longevity of the business. He hand holds executives to take up managerial roles. “Management succession is a continuous process. There are always two-three people preparing for every position. We use the same talent across group companies and rarely hire laterally,” he says.