JSW Steel unveils Rs 6,000 crore expansion plan

Bangalore: JSW Steel plans to invest Rs6,000 crore in expansion in 2008-09, of which the company would spend Rs1,000 crore in augmenting raw material supply, through acquisition of mines in India, Chile, Mozambique and Indonesia among others.

The remaining investments would be spent in expanding capacity at the company's plants in Karnataka's Vijayanagar and Salem in Tamil Nadu said Y Siva Sagar Rao, the company's joint managing director and chief executive.

Rao said at a media briefing that JSW Steel's annual production capacity of 4.8-million tonne of steel from its Karnataka and Tamil Nadu plants would be increased to 8 million tonne by mid-2008 and would touch 32 million tonne by 2020.

"By 2020, we will also have additional production of 10 million tonne each at our upcoming greenfield plants in West Bengal and Jharkhand,'' Rao said.
 
JSW Steel is also investing Rs850 crore at its Vijayanagar plant in Karnataka to convert some of the ore waste into a usable grade. This 'beneficiation plant' will help the company's efforts to cut costs Rao said.

At present the company is acquiring land for its plant in Jharkhand and has already purchased land in W Bengal where the company would set up a 10-million tonne a year plant that will begin production with 6 million tonne in the next 30 months. Each of the new plants would involve investments of Rs40,000 crore each, Rao said. He said that the company had been allocated coal mines near the plant in Jharkhand.

Apart from this the company is expanding the Salem plant to double its capacity to two million tonnes a year. The steel plants in Karnataka and Tamil Nadu together are projected to produce eight million tonnes a year by this year end.

The company has a 15 per cent share in India's steel market and a 22 per cent share of the galvanised steel market.
 
JSW Steel expects to take hit of Rs 450-500 crore in 2008-09 in its bottomline, mainly due to increasing input costs and a reduction in steel prices under government pressure. In May this year major steel producers, including JSW, were forced to cut prices of flat products by Rs4,000 per tonne and rebars and structural steel by Rs2,000 per tonne.

The company has also agreed to hold the price line until July. Rao said that though efforts to improve operational efficiency and a cut of 5 to 15 per cent export duty on flat products, used in auto and the white goods sector, would benefit the company, though not enough to fully compensate the revenue loss.
 
Rao said the price of iron-ore rose by 65 per cent and coking coal by 200 per cent in 2007-08, and led to a 2.66 per cent fall in EBIDTA margins during the fiscal. Margins fell by 11.6 per cent during the fourth quarter ending March.

The per capita consumption of steel in India is around 40 kg and is rising due to expansion of infrastructure.

JSW Steel is also expanding its retail format Shoppe, to set up 50 retail stores across India during the year. The retail operations of the company would be based on the franchisee model and would involve an investment of Rs 10 lakh to Rs 14 lakh for each outlet. Officials said the company was targeting to increase steel consumption in India through its retail operations.

The company expects retail sales to account for about 35 per cent of its total sales. In 2007-08, JSW posted a net profit of Rs 1,640 crore on a consolidated turnover of Rs 13,665 crore.