Joint Managing Director & CEO, JSW Steel Limited
A Good Q4 For JSW Steel | Input Costs Have Gone Up Due To Rupee Depreciation, Says Company
#Q4WithCNBCTV18 | JSW Steel Posts A Good Set of Q4 Numbers
Joint MD & CEO, Jayant Acharya to CNBC-TV18
Inputs costs have gone up due to depreciation of Rupee
Net debt-EBITDA ratio to be capped at 3x
No plans to raise money via QIP route
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About Jayant Acharya
Jayant Acharya, Joint Managing Director and CEO of JSW Steel, discussed the company's first-quarter performance for fiscal year 2027 in media appearances. He reported record sales and described the quarter as having "very strong operational performance." Acharya attributed the results to robust domestic steel demand, which he said grew at 8.3%, and a 15% quarter-on-quarter volume growth. He noted that capacity utilization, excluding the BF3 furnace, stood at 94%. Acharya stated that net debt to EBITDA improved to 1.46 from the previous quarter, with net debt reduced to approximately 46,000 crore rupees. He said the company's comfort level is to maintain the ratio below 2.5 as it expands capacity toward a target of 62 million tons. Looking ahead, Acharya said the July-September monsoon quarter typically brings seasonal impacts, but he expected "better traction in terms of demand and prices" in the second half of the year. He indicated that Q2 would see increased volumes from the ramp-up of the BF3 furnace at Vijayanagar and from JSW Steel's Ohio operations in the U.S. Regarding costs, Acharya said cooking coal would impact expenses to some extent but that iron ore prices have started reducing. He said he could not provide a specific EBITDA band for the next quarter due to difficulty in estimating prices. On expansion strategy, Acharya stated the company's focus is on brownfield growth and the Paradip greenfield project, and that it would only consider other assets if they are "really so attractive."
Transcript (15 segments)
N
Nigel0:00
I think we have the next management with us, Nigel. JSW Steel. Well, let's get straight to it. JSW Steel stock is more or less flat as the numbers are quite good actually. The net debt came lower as well because of that deal they've done with regard to BPSL. We have with us Mr. Jayant Acharya, the Joint MD and CEO at JSW Steel. Good morning, Mr. Acharya. Always good to have you on the show. Well, the past quarter was quite good, but let's look ahead. Quantify the steel price increases on a sequential basis as well as give us some kind of color with regard to raw material cost which have also moved up.
J
Jayant Acharya0:32
On the price side, I think the prices have gone up on a point-to-point basis by 20 to 25% between January and March from the lows of December, which was a 6-year low. Some part of the prices you will see captured in Q4 and some part will be captured in Q1. What I would like to point out is that the costs are also going up. The depreciation of the rupee is also impacting cost to an extent. On the coking coal side, our coking coal costs for Q4 have gone up by $16 over the previous quarter. Iron ore is by and large stable.
N
Nigel1:24
Got that. Got that. But not too much. Okay, got that, Mr. Acharya. Tell us a little bit about coking coal cost. You said it went up in the past quarter compared to Q3, but in Q1, how much higher will it be than Q4?
J
Jayant Acharya1:39
So, in Q1, we expect another increase of between $12 to $15. In addition to coking coal, iron ore prices have also started increasing in the last month and weeks. Some impact we were able to reduce last quarter through better blending and reduced consumption. But iron ore increase will also play out to some extent in Q1. So, some increase in coal as I said, between $12 to $15, some increase in iron ore and other related costs. So we would expect costs to go up. However, the carry forward of the Q4 price impact will flow into Q1. And April prices have also gone up. So to that extent, the price will cover and improve margins after absorbing the cost.
N
Nigel2:36
EBITDA per ton has improved and you're guiding for a better performance in Q1. Got that. Now, steel prices have moved up by 20-25% as our ticker team has noted. Do you see a case for further steel price hikes?
J
Jayant Acharya2:49
I think prices will be range bound now. We see that primarily, as you said, imports have moderated. One was the safeguard duty which was implemented at a very right time at the end of December, which helped reduce imports. Exports have also improved to some extent from India. But given the geopolitical challenges, I don't expect export numbers to improve. Imports will be moderate this year. So therefore, domestic capacity expansions will go into the domestic market and will be more India centric this year.
N
Nigel3:35
Okay, Mr. Acharya, let's turn our attention to the international EBITDA then. Last quarter a little bit of pressure compared to the previous quarter, but it's moved well into the green in the past fiscal year and improved big time in FY26. It appears that tariffs in the United States are helping the US operations. Give us some color on international operations going forward.
J
Jayant Acharya3:56
International business, last quarter overall between US and Italy improved over Q3. Not very material, but it improved. On a year-on-year basis, the US has gone from negative to positive, from a negative of about $35 million to about $36 million positive. Italy has been more or less stable, from about €14 million last year to about €16 million plus this year. Going forward, we expect the US to show improvement with our caster upgrade and vacuum degassing which has now been completed at Ohio. We'll be able to offer better products, enabling us to get better value. We also will complete the Baytown expansions this year, mid-year, and that will also aid value. So from the US side, I expect performance to be better. Italy also will show improved performance on the back of better volumes from the rail mill.
N
Nigel5:13
Got it. All right, Mr. Acharya, you all have brought down the net debt number drastically, but that's because of the deal you have done with JFE and BPSL. What is the outlook on net debt going forward? Can you give us some guidance on that front?
J
Jayant Acharya5:28
So, debt we finished the year with roughly ₹54,000 crores of debt. Our net debt to EBITDA ratio has come down significantly. We are at 1.81 right now. Going forward, we would expect the debt level to be moderate. The second tranche of JFE's contribution to our joint venture would come in, and that would further deleverage our debt. Additional cash generated during FY27 would go into our capex and also into deleveraging. So going forward, I think we see a good net debt to EBITDA ratio, and that's why we have taken a target to have a net debt to EBITDA of three, with a comfort level to be below 2.5 while we grow our capacity. I just wanted to add a bit here, Nigel. On the fact that this transformational year has provided the necessary foundation with a stronger balance sheet to grow. We see India as a big opportunity because India demand looks strong. The manufacturing ecosystem looks strong. We would like to revise our targets for growth for FY32. We would be targeting an India capacity of 62 million tons. In addition, joint venture capacities would be separate, totaling 16 million tons cumulatively between the JFE joint venture and the Posco joint venture. So that would take our capacity, including the US operations, to close to 80 million tons, which makes it one of the largest steel companies worldwide.
N
Nigel7:27
Mr. Acharya, you have taken an enabling resolution yet again for a QIP. Any fund raise plans? Is there a QIP in the works?
J
Jayant Acharya7:37
No plans as such.
N
Nigel7:39
Okay, thanks for clarifying that. And final question before we let you go. You have laid out that big plan to go to around 62 million tons plus the JVs of another 16 million tons, and the consolidated entity goes to around 80 million tons. Any inorganic plans you are looking at? Vedanta's asset, maybe RINL, maybe a couple of RVNL or NMDC steel plant?
J
Jayant Acharya8:02
So, we have recently in this board also approved a small transaction for acquiring an asset close to us. An asset called BMM Ispat. It's 50 km from our plant. It has a long product portfolio. We have gone in for an acquisition and the board has approved it. That plant has a capacity of about a million tons and has the ability to double. It has surplus land and we can double at a very low specific investment cost. That's one acquisition which is value accretive, and we would like to produce engineering steel in that facility. As regards to additional assets, we will keep ourselves open. In case there is any opportunity that makes sense, we'll certainly look at it.
N
Nigel8:53
Always a pleasure talking to you, Mr. Acharya. Thanks a lot for joining in and giving us these details. EBITDA will improve, margin performance will improve from here on. Continue to keep debt at very manageable levels, and inorganic growth if there's an opportunity, you look at that. But for the time being, you'll have organic plans.