JSW Steel Earnings Call for Q3FY26

Good evening everyone. Let me begin with our strategy. JSW Steel has adopted a prudent strategy over the past years, creating significant value for all stakeholders. On December 3rd, we announced a strategic joint venture with JFE Steel Japan for the BPSL steel business. JFE will take a 50% stake at an equity value of ₹31,500 crores and enterprise value of ₹53,000 crores. This transaction enables ₹32,000 crores cash flow and about ₹37,000 crores deleveraging for JSW Steel. This partnership allows us to grow BPSL with our project expertise and operational excellence while leveraging JFE's technological expertise for value-added products. It also allows JSW Steel to accelerate growth across its portfolio in a financially prudent manner. Today, the board approved a 5 million ton steel plant at Jagatsinghpur, Odisha, housed in JSW Utkal Limited, with capex of ₹31,600 crores and commissioning by FY30. This first phase has expansion potential to 13.2 million tons. We are on track to reach 50 million tons in India by FY31. On the macro front, the IMF projects 3.3% global growth in 2026, with India's GDP pegged at 7.4%. We remain the world's fastest-growing major economy. Strong post-GST consumption momentum, income tax cuts, and benign inflation are supportive. Rural indicators remain positive, commercial real estate is robust, and conditions for private capex are increasingly conducive. India's steel consumption grew about 7% over 9 months, though Q3 was at 4.6%. December demand was about 14.5 million tons and Q4 looks good on seasonally strong demand and restocking. For FY27, demand is projected at 7-9% growth. The government has imposed anti-dumping duties on hot-rolled coils from Vietnam and cold-rolled coils from China, plus a safeguard duty has been finalized, giving domestic industry a level playing field. In China, steel production declined 4.4% in CY25, a decline of about 44 million tons, but exports surged 14% to 133.5 million tons due to weak domestic consumption. Anti-involution measures, export licensing, and production moderation should help support regional prices in Asia. JSW Steel ranked number one globally in the S&P Global Corporate Sustainability Assessment and continues to be part of the Dow Jones Sustainability Index. Our Dolvi unit was awarded India's best performing unit by the President of India. We have 1 GW of renewable capacity commissioned with approval for 2.5 GW generation and 320 MWh of battery storage. We deployed AI-based vision systems across operations that are delivering substantial cost savings, reduced emissions, and prevention of over a thousand safety incidents. At Vijayanagar, the 5 million ton plant is fully ramped up. The 1.5 million ton BF3 upgradation remains on track for commissioning by end of Q4 FY26. Dolvi Phase 3 expansion from 10 to 15 million tons is progressing with completion expected by September 2027. The board also approved 2 million ton tinplate and 3.6 million ton GI/GL capacity at downstream units in Rajpura. On raw materials, 13 of our 23 iron ore mines are now operational after commencing production from the 0.5 million ton mine in Goa. Once fully operationalized, we expect to produce about 50 million tons per annum, covering 50% of our iron ore requirement by FY31. On coking coal, three mines and coal linkages in India plus a 30% stake in the Illawarra coking coal mine in Australia will provide about 5 million tons, meeting 25% of our requirement. We are also acquiring the Mozambi high-grade coking coal deposit, expected to close in Q4 of this calendar year. Consolidated crude steel production was 7.48 million tons, up 6% YoY. Indian operations delivered 7.28 million tons, up 7% YoY, with utilization at approximately 93%. We achieved best-ever sales, up 14% YoY, with domestic sales rising 10% in Q3 and 12% in the first 9 months. Value-added product sales were the highest ever at 4.54 million tons, growing 16% YoY and forming about 61% of total volumes. Consolidated revenue stood at ₹45,991 crores with adjusted EBITDA of ₹6,620 crores, EBITDA per ton close to ₹8,700, and a margin of 14.4%. Indian operations delivered adjusted EBITDA of ₹6,522 crores with a margin of 15%, enabled by strong domestic sales growth and better value-added mix. US operations reported EBITDA of $3.1 million, lower due to the Ohio plant shutdown for caster upgradation. Italian operations delivered EBITDA of €5.3 million. Consolidated PAT stood at ₹2,410 crores compared to ₹719 crores in Q3 of last year, after recognizing net deferred tax assets of ₹1,439 crores related to the slump sale of the BPSL steel business. Net debt was at ₹80,347 crores, with net debt to EBITDA at 2.91 and net debt to equity at 0.92. Weighted average interest cost improved to 6.51%, an improvement of approximately 60 bps year-on-year. Capex during the quarter was about ₹3,500 crores and total for 9 months stood at ₹10,000 crores. For FY26, we expect total capex of ₹15,000-16,000 crores. The JSW One platform saw a significant uptick in volumes, with GMBV of ₹4,544 crores, a 36% jump YoY. We have achieved over 74% of our consolidated volume guidance for FY26 and expect to broadly achieve our full-year guidance of 30.5 million tons for production and 29.2 million tons for sales. To conclude, steel prices have begun recovering from multi-year lows in late December and have continued an uptrend in January. Q4 margins should be better on higher steel prices supported by seasonally strong demand, which should offset higher raw material prices. We expect cooking coal costs to increase between $15 to $20 while iron ore prices are expected to be range-bound. We expect strong Q4 volumes and see steel demand growth of 7-9% for FY27. We'll be happy to take your questions. Thank you.

The prices of steel have started recovering from the multi-year lows in the last quarter. In the end of December, we saw prices moving for flat steel by roughly ₹1,500 per ton. In the beginning of January, it has moved by about ₹2,000 per ton. We see some recovery possibility during this quarter as we move ahead. The slurry pipeline is expected to be completed in Q4 of FY27. On the BPSL, we are pretty much on track versus the timeline we had indicated. Earlier this week we received the Competition Commission's approval for the venture. We are right now in the process of obtaining shareholders' approval, which we expect by the first week of February. As indicated, we should see the slump sale concluded before end of March, translating into about ₹24,400 crores of effective cash coming into JSW Steel and a net leverage reduction of about ₹29,000 crores. The second leg also remains on track, expected end of Q1 of FY28, which will be an additional ₹7,875 crores.

If you see the presentation we have given this quarter, we have indicated expansions likely by FY31, which takes it to about 56 million tons by FY31, including 1.5 million tons of Ohio and 4.5 million tons of the BPSL asset. So we have moved up with respect to our earlier goal of 50 million tons in India by the end of this decade. The combination of the value unlock in BPSL certainly enables us, as you rightly said, to expand faster, which we are doing. We have taken the Odisha project, we are doing a project in north India for tinplate and substrate for GI and GL, and we will be able to fast-track our other brownfield expansions as we go along into this decade. We are adding capacities in line to meet India's demand.

We are seeing growth across sectors. If you look at the India story now, you'll see growth across construction and infrastructure, good growth in commercial real estate, good growth in industrial, and now post the GST announcement, especially in the consumption side — automotive, appliances. The other area is renewable energy. By and large, we are seeing it across sectors.

The new capacity will be flat steel. It will be a 5 million ton facility with a hot strip mill, steel melting capability, and blast furnace. The steel melting capability will be for roughly about 6.5 to 7 million tons, with potential to grow. The hot strip mill can ultimately be expanded to 6 million tons once the second blast furnace is taken up. On your second question about the intensity of flat steel in construction — the intensity has been increasing gradually. Globally, flat steel is used in construction through steel-based plated constructions, and we are seeing that slowly catch up in India. Steel and glass buildings are coming up in India — they are safer, faster to construct, and unlock value in terms of time. Bridges are also adding to flat consumption, as people are looking at steel columns and steel supporting infrastructure for bridges because it finishes construction faster. So yes, the intensity is going up.

₹31,600 crores.

Correct.

From a sales guidance point of view, we are maintaining our guidance of 29.2 million tons. Production guidance also at 30.5 million tons is more or less on track. Going forward into next year, as the BF3 capacity unlock happens, we will be able to add to our available capacities and that would further increase sales from all our assets.

Why do you say flat?

No — the inventory liquidation, you're probably not counting. We did an unlock of 300,000 tons of inventory in Q3. In the current quarter also we are looking at some inventory liquidation in Q4. From a guidance perspective, we had sales of 7.64 million tons last quarter. Our guidance is that we will meet 29.2 million tons. So maybe similar to Q3 for Q4. From an Indian operations point of view, it will be slightly higher, but from an overall basis it will not be very different.

Yeah, I'm looking at the fourth quarter. I'm saying we liquidated inventory in quarter three. We are looking at some inventory liquidation in quarter four as well. From a guidance perspective, we had sales of 7.64 million tons last quarter. Our guidance is that we will meet 29.2 million tons. So maybe similar with respect to Q3, Q4 — if that's what you're asking — from an Indian operations point of view it will be slightly higher, but from an overall basis it will not be very different.

I think the details the investor team can explain, but you're talking about the consolidated capacity update, right? That's what we have given you in that slide.

What we are trying to say is that we will be spending about ₹100,000 crores over the next four to five years. We will give a breakup year-wise in our annual board results in May, but roughly over four to five years you can spread it. It'll be a little higher in the next two years and then slowly go down.

So we have been giving you the value-added numbers without the JSWML in the last few quarters. This time, including JSWML, the value-added product mix is 61%. Excluding JSWML, it is 67%.

Just one second. What's your other question? Maybe we answer that first.

Indeed. So, you are seeing the standalone numbers, right? We'll give you this input offline. It's primarily iron ore sales in Q3.

No, basically we look at JVML and Vijayagar from an operations point of view as a combined decision process. We have certain advantages in JVML on the cost side. We have some advantages in JVML on the state tax side. So we have a state tax advantage even if you sell outside the state. Therefore, outside state movement like to the north, we prefer to do from there, which is a higher freight incident and therefore you see a lower realization, but that enables us to overall optimize our total Vijayagar blend because the other units are able to supply to Karnataka, which has a tax advantage. JVML is able to leverage the sales to other locations where we get the tax advantage.

So from a percentage point of view, Europe as a percentage of our total exports is going down. Asia, Middle East, and other countries are picking up. So some part is already getting mitigated. We will understand the guidelines fully as and when they come and we'll be able to give you maybe some more color as we go along. But some readjustment in prices in Europe is also something which will take place. So let us understand the market once the full guidelines play out.

First of all, from a capex point of view, if you look at our BPA, our Dolby plant expansion which we have just undertaken is actually specific investment is even lower than this. This is slightly higher because of being a green plant. The other reason is that we are doing this plant in a modular fashion. We already had announced the pellet plant and some enabling infrastructure before that. That is happening parallelly but even then, this 31,600 crores also includes some enabling infrastructure for phase 2 expansion. So when you look at a 10 million ton expansion including the next phase, our capex cost will be further competitive compared to others. I think over time, that's the project expertise which JSW has developed and we are able to do specific investment costs lower over time and faster.

No, we don't see.

No, we do not think it'll load our balance sheet. From a ratio point of view, we will remain financially prudent while we invest. We are quite well placed to be able to manage these expansions while we keep our ratios in control. You will see the additional volume from BF3, the full ramp-up of JVML, the new capacities from Dolby which will come in in phase 3. All these will generate additional cash flows which will contribute to the internal accruals which we'll be able to spend for the capex. So from that perspective we are fine. We don't see any challenge.

Just to add, the BPSL transaction once it's concluded would also add significant new cash which you have to take into account while plotting the numbers.

No. We are right now below 3 net to EBITDA. We reported 2.91. If you look at 100,000 crore on its totality over 4 to 5 years, we are talking about 20,000 to 25,000 crore in certain years. It can go up, certain years it'll come down, which is not very different from the capex we have been historically doing. You add BPSL cash in the mix and you will realize that perhaps it's not as big a problem as it looks like.

No. From a standpoint of exports, I would request you not to take any numbers right now because one is that the domestic demand is going up. If I were to look at incrementally, this year we are expected to add about 11 million tons in India. We'll close at about 163 million tons of demand. Next year, even at a growth of roughly 8%, we'll be at 176 million tons. This incremental demand being created in India, we feel that this will provide ample opportunity for us to use our capacities within the country. The need for exports will gradually also reduce. Therefore, the export moderation will happen in general and we will take a call on which area to reduce. With respect to your question on CBAM calculation, those are in process. I wouldn't like to give you any number right now because we haven't really finalized anything at this stage.

Yes. But there are different technologies, different numbers, asset to asset there is a difference. So my commission level in Vijayagar will be different from Dolby level. That's why I'm saying there are different moving parts. So let us wait for some more clarity once we do it.

No, we are in the process of getting the verifications done. The CBAM will be asset-wise. So basically it will be location plant-wise, not for the company as one.

It will gradually happen. Any exports which happen today, in the year 2026, you would have to give them a certificate after the end of the year. The importer will have to look at it and take a certificate from a verified source which we will be able to provide to them. And based on that, the importers on record will have to pay the CBAM differential at that point of time. So that will happen sometime in the beginning of 2027 for the year 2026.

I would not be able to give you exact figures of how much we have spent right now, but we are on track for our expenditure. The total cost of the project, including some additional capex which we had declared during the last board meetings, I think is close to 20,800 to 20,900 crores. We are on track for that expansion. With respect to Odisha and the power question, we would be putting up capacity for power which we would require. In addition to that, we would be buying something from the grid. So it's a combination which we would be doing, but some major part will be from our own captive and some will be drawn from the grid and other sources.

Yeah, we have that detail, we can give it to you.

So I'll take the first question and thanks for asking. Our capital allocation principles remain intact. Capital goes to what is core to us, which is steelmaking. Saffron land acquisition is earmarked for a potential steel facility in future and there will be no other use for that. On the reality deal, we have not spelled out the details, but what we require is essentially office space as we are expanding as a company, and what we will get out of this is a very lucrative return in terms of cost invested in office space. This is our whole intention of being in that deal and there is nothing more to that.

The second question was on safeguard. The effectiveness of safeguards, risk on circumvention imports probably from Japan and Korea restricting our ability to increase prices. Yeah. No, the safeguard is certainly, even if you look at Japan and Korea, 12% safeguard is certainly very helpful. We expect that to limit unfair trade to a large extent. It still allows scope to increase the price, and along with depreciation of the currency, I think it leaves room for some price improvement during February and March. So that's something which we will see. Also keep in mind that prices in India fell actually more, they came to a discount versus imports, so that's something which anyway has to come back to a sensible level.

From the iron ore point of view, I'll request Arun to respond on Maharashtra and Surja.

There was a drop in realization in this quarter. If you were to look at the market price, for example if I take an example of a hot rolled coil, the market dropped quarter on quarter by about 2,200 rupees per ton. We as a blend were able to reduce the impact of this through value-added mix, which was the ever highest as I mentioned. So our drop was close to 1,400 odd rupees per ton on the overall mix of JSW.

Yeah. 1,500 odd I think in December and about 2,000 odd in January.

Last quarter, 33%.

The location is very conducive for exports primarily because we are on the port. We would be looking at the product mix which would be tailored to look at some of the export requirements as well. From a renewable energy or gas utilization point of view to reduce the carbon emissions, those discussions are ongoing. We're trying to see if we are able to get in some gas and produce using the best available technologies, which will be used including in the blast furnace.

So our asset at Dolby, emissions are lower than at other locations. That is one. Second thing, when you're looking at supplies to Europe or looking at low emission supplies, we have already communicated to you that we are looking at an asset for green steel or low emission steel through the electric arc furnace, natural gas, renewable energy route at Salav, which will take care of the requirement for anybody who has low emission carbon requirement.

No, one thing we know is that CBAM impact is overall for everyone, a similar impact. So prices in Europe will go up to that extent of the CBAM impact anyway. While we are still assessing what will be the real impact of CBAM, while the policies are still being understood by everyone, by the importers as well as exporters, eventually Europe will remain a market for people despite having CBAM, because overall cost in Europe will go up. This is where we look at it. We are waiting for this entire policy coming out and being understood, and thereafter we will take a call on that.

As of now, this is up to the hot strip mill. We are not yet announced any downstream plan at Odisha. Currently what we have announced is the downstream plant in the north of India, which I mentioned about tin plate and galvanized and galvannealed capabilities for our color-coated lines. We will look at the Odisha downstream at a later stage.

The Karapa project, which basically is an electric arc furnace project, we just announced last quarter, has capacity to expand as well if we require. But keep in mind that electric arc furnaces in India don't really have scrap. So electric arc furnaces depend on scrap or on high-grade DRI, which basically relies on imported iron ore. So you effectively have to do some mix which is viable from an India standpoint. But what we are doing at Salav is again going to be electric arc furnace based production. And it's 1 million ton, and we already have electric arc furnaces currently operating at various locations.

So iron ore import is largely because of grade availability in India is very poor. It is going down every year. That's why we had gone for a higher grade of imports of iron ore. So it is more of a combination requirement in the production usage. At the same time, availability of iron ore in different geographies is different. We have to consider that while we take our buying decision. So it may not remain uniform every year, but whenever we see this opportunity coming up, we would like to shift our sourcing base accordingly.

No, I don't think so. The government is also having a lot of policy interventions coming in and they're ensuring that the iron ore availability is not compromised in line with the national policy which they are targeting. So iron ore availability will be maintained with all the initiatives the government is taking and the way the private miners are also trying to increase their capacity and production. New mines will also come up for auction apart from unlocking mines which have been held up due to various reasons. So we do not envisage a shortage in India as we go along, but we may have to put facilities for beneficiation or value addition into pellets as the case may be. But yes, we have ample resources in India. So from an availability point of view, we don't see a concern.

So thank you very much for the time. Just to reiterate, we look forward to a good quarter 4, stronger volumes based on a seasonally strong quarter. Margins are likely to be better with prices recovering and offsetting some of the raw material price. I think from the next year's perspective, the BF3 will be up and running from April onwards and we'll be well positioned to meet the requirements in India from next year onwards. Our capacity in India will be close to 36 million ton after the BF3 expansion is finished. Thank you and all the best.

Thank you everyone. Please reach out to us if you have any further questions. Bye-bye.