Global demand forces Jindal Steel to opt for capacity expansion
By Pradeep Rane | 10 Oct 2003
Mumbai: On the back of a strong global demand, Jindal Vijayanagar Steel (JVSL) is planning to go for a capacity expansion.
JVSL plans to expand the capacity from 1.6 million tonnes in 2003 to 2.4 million tonnes in 2005 and 4 million tonnes in FY07. This will be at a minimal capex of $50 million and will be operational under a new entity in the form of a structured vehicle.
JVSL plans to use its free cash flow to reduce debt in the coming years apart from the routine capex of $3040 million, according to an ICICI Securities report. JVSL expects gains in cost optimisation and operational synergies, mainly in utilities.
The company is planning to bring down its cost of production from $200/te to $140/te in next two-three years. JVSL plans to achieve this by reduction in the power cost by installing a captive power plant and improvement in productivity (yield) from the existing 90 per cent to 94 per cent through a technology tie-up with NKK of Japan, the report said.
Jindal Strips plans separate division
Jindal Strips Ltd (JSL) is setting up a separate division and a dedicated design centre to promote stainless steel (SS) usage in India.
The objective of the institute will be to develop designer and lifestyle products for architecture, building and construction, automotive, railways and transport and other growth areas. The focus areas include shopping malls, multiplex complex, hotels, office complexes and development and sponsoring of street furniture in Delhi and Mumbai.
With a clear focus on the SS business, JSL has hived off its investment business into a new company (new JSL) and the manufacturing operations into Jindal Stainless Ltd.
Also, the global demand for SS has increased by 5.8 per cent and in China by 17 per cent over the last few years. The demand in India is expected to grow by 8-9 per cent and the demand from China is expected to grow at compounded annual growth rate of 12 per cent between 2002 and 2010, an ICICI Securities report said.
