Joint Managing Director & CEO, JSW Steel Limited
JSW Steel Earnings Call for Q4FY26 & Full Year
Conference Call with JSW Steel Management and Analysts on Q4FY26 & Full Year Earnings Performance and Outlook.
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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 (53 segments)
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Jayant Acharya0:00
Jayant Acharya presented JSW Steel's performance and outlook. Key points: raw material targets of 50% captive iron ore and 25% cooking coal by FY31; India's steel demand to grow from 9% to 16% of global consumption; JSW's growth plans including expansions at Vijayanagar, Dolvi, Utkal, and Kadapa; financial results with record revenue of 51,100 crores in Q4 and normalized PAT of 3,475 crores; net debt reduced to 54,000 crores; capex plan of 126,000 crores over 4-5 years; and guidance of 29.75 million tons production for FY27.
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Operator14:08
Thank you very much. We will now begin the question and answer session. Anyone who wishes to ask a question may press star and one on the touch tone telephone. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to use handsets while asking their question and to restrict to two questions at a time. Ladies and gentlemen, we will wait for a moment while the question queue assembles. We'll take our first question from the line of Vibhor Singhi from JP Morgan. Please go ahead.
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Vibhor Singhi14:43
Yes, hi. Thanks for the opportunity and congratulations on the strong results. The first question is on raw material security. Given the target of 50% captive mix, how confident are we in ramping up from 1/3 currently to 50%? And what would be the mix for imports versus domestic sourcing?
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Arun Maheshwari15:19
Right. I'll answer that. I'm Arun Maheshwari. Regarding security of iron ore, we have 50% EC capacity available for our own consumption. Depending on logistics and proximity, we decide how much to take from captive. We have 13 operational mines and 12 under exploration. We are confident that at 62 million tons of JSW volume, we will have our targeted captive sourcing. Total combined resources of about 1.7 billion tons without exploration mines.
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Vibhor Singhi17:05
Okay, got it. That's good. And the second question is on the Middle East conflict. We have seen reduction in commercial LPG supplies and gas shortage. Do you see any risk to the volume guidance if the conflict continues?
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Arun Maheshwari17:27
Well, yes, LPG and LNG supplies have been a concern due to Middle East disruption, but our exposure to gas-linked production is very limited. However, it does have an impact on demand out pacing flats.
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Vibhor Singhi17:53
So, any thoughts around longs expansion as well? I know you mentioned one of the acquisitions, but apart from that, are we planning to get active in longs as far as downstream expansion is concerned?
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Jayant Acharya18:11
So, in the last announcements, we have announced the Kadapa section mill for beams and the expansion at Raigarh for beam and rails. In the BMQ facility, which we have approved for acquisition, a 1 million ton long facility will be expanded to about 1.8 million ton in special engineering steel products. These will add to our long product capacities. We believe India's infrastructure growth will require long products.
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Operator19:09
Next question is from the line of Amit Murarka from Axis Capital. Please go ahead.
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Amit Murarka19:16
Yeah, good evening and thanks for the opportunity. So, just wanted to understand the thought on growth going ahead. Earlier we have taken one project at a time. Now you are indicating multiple projects. Is it the new normal? Should we look at the business now with three balance sheets: standalone, JSW JV, and POSCO JV?
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Jayant Acharya19:49
From JSW Steel's perspective, by FY30, JSW Steel alone will be at approximately 49 million tons. Including JVs, close to 55 million tons by FY30. Expansion up to FY32 would be to 62 million tons for JSW Steel. On top of that, we expect 10 million tons from JV with JFE and 6 million tons from POSCO. So, you will track JSW Steel at 62 million tons and the JVs separately.
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Amit Murarka21:18
No, my question was more long term. In the past you've taken one project at a time. Is this now a new normal that you'll be taking up multiple projects through the JV structure?
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Jayant Acharya21:36
Yes, as we indicated earlier, the idea of the JV was to strategically grow faster in the country while helping us deleverage. We'll have a double engine of growth: JSW Steel and the joint ventures. India is the fastest growing market, and this is the right time to grow faster. So, yes, we would be expanding faster along with the joint ventures.
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Amit Murarka22:19
Right. And given the pace of growth is going to be so high, is there a plan to also export a larger part of these volumes than what we are doing currently?
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Jayant Acharya22:34
No, can you just repeat that once? Sorry, I missed that. ... We don't see the need as of now. The way it is structured, you will see more domestic alignment. It's possible that when capacity comes up incrementally, you may have slightly higher exports initially, but then come down. Our Paradip facility on the port would be a natural place to export from, so exports from Paradip will naturally be higher. But given domestic growth, we believe this capacity will be required to meet domestic demand. Capacities are going to follow demand. There will be a lag up to 2030. We are confident that with our faster execution and low specific investment cost, we are well placed to grow in India.
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Operator24:42
Sir, could I ask a data question? Could I request you to join back the queue, please, as we have participants waiting for their turn? Thank you. Next question is from the line of Sumangal Nevatia from Kotak Securities. Please go ahead.
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Sumangal Nevatia24:57
Yeah, good evening and thanks for the opportunity. My first question is with respect to a JV with POSCO. Just want to understand the rationale and what value does the new JV partner bring given we already have a strong balance sheet and expertise with JFE?
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Jayant Acharya25:32
There are two reasons. Both JFE and POSCO are leading global steel companies with strengths in technology. POSCO has areas in high strength steels, giga steels for lightweighting, hydrogen technology to reduce emissions, digitalization and AI. Additionally, POSCO has a 2 million ton cold rolling facility in Maharashtra and wants to integrate backwards with a steel plant. They want localization of sourcing rather than importing from Korea.
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Sumangal Nevatia27:07
Understood. And on this topic, how does our existing JV partner view association with new global players? Is there potential conflict in future? We'll have three large plants supplying flat steel from Odisha. Will they have different sales strategies or compete?
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Jayant Acharya27:40
We do not foresee any conflict between the JV partners. They will have their own strategies as different legal entities. But India's growth is strong and will enable all entities to grow. POSCO Maharashtra has a captive demand of 2 million tons for the new facility, so that will supply about 1/3 of their new capacity to the downstream facility.
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Sumangal Nevatia28:29
So got it. Second question is... Can I go for a second question?
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Jayant Acharya28:34
Yeah, please go ahead.
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Sumangal Nevatia28:36
Yeah, so just on a broader level, given the overall macro issues and pressure on inflation, do we see any risk of withdrawal of protection given our domestic prices are enjoying 20% higher prices due to protection?
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Jayant Acharya29:04
I think we actually really look at protection. India is probably one of the more balanced countries with respect to protection. We are seeing protections between 25 to 50% in various parts of the world. In India, with an 11.5% safeguard duty, we are far lower. Your comparison with the lows of December is not fair. Three years back in April '23, we had the same price as in April '26. The cost environment was similar, but depreciation of the rupee has been severe. So, this is more of a price correction to make it viable. From international price perspective, we are now well balanced. Europe is around $830, US close to $1,100 per metric ton of hot rolled coil. Japan and Korea internal prices are higher. So, we are price-wise more balanced in India.
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Sumangal Nevatia31:05
Okay, that's very useful. Thanks and all the best.
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Operator31:09
Next question is from the line of Pinakin from HSBC. Please go ahead.
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Pinakin31:17
Yeah, thank you very much, sir. My first question is on the capital spend of 126,000 crores over the next 4 to 5 years. That clearly does not capture the entire 30 million ton JSW Steel expansion and the 10.5 million ton at the JV. Can you give us a broad range of the capex over the next 5-6 years to go from current capacity to 78.5 million tons, including downstream mining?
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Jayant Acharya31:51
Currently, our capex plans are at 126,000 crores. Incrementally to be at 62 million plus investment for equity in JV and mining, downstream facilities, our sense is that we would require another 100,000 crores between now and FY33. So, you have about 6 to 7 years to spread this capex.
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Pinakin32:43
Of course, just to understand clearly, this 126 plus another 1 lakh crore, so 2 lakh 26,000 crore over the next 6 to 7 years, right? FY27 is 22,000 crore. So the annual run rate will go from 20 to 30-35,000 crore a year in the next couple of years as multiple projects pick up pace.
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Jayant Acharya33:11
Yes, if this is including the joint venture projects, including the mining additions in Mozambique. It's a combination of all of them.
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Pinakin33:30
Got it. And my second question is on the guidance. If I give away BPSL from this year's base, it implies roughly 9-9.5% production growth in FY27. Given the timelines of project commissioning, is it fair to say that this is the broad 8-10% CAGR we can look at for the next 3-4 years?
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Jayant Acharya34:00
If I see the guidance we have given, 29.75 million tons is a 13% growth in production on a like-to-like basis, and sales guidance of 28.6 million tons is a 10% growth. Going forward, capacities from Vijayanagar and Dolvi will add about 7 million tons between now and September '27. Utkal facilities and further expansion at Vijayanagar will be there by FY30. Each will provide incremental EBITDA for the next phase of growth.
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Pinakin34:56
Got it. Got it. This is very helpful. Thank you very much, sir.
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Operator34:58
Thank you. Next question is from the line of Pallav Agarwal from Antique Stock Broking. Please go ahead. Pallav, your line is unmuted. Please go ahead with your question.
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Pallav Agarwal35:10
Yeah, good evening, sir. Am I audible now?
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Jayant Acharya35:14
Yes.
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Pallav Agarwal35:16
Yeah, so first question was on BM Ispat. Will you share what was the actual production and EBITDA number in FY25 for this company?
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Jayant Acharya35:29
I think we'll request our investor team; you can reach out to them for details. I don't have it off the cuff right now.
But it's a facility of 0.9 million ton. Just to give you an overview, we would produce in the range of 0.8 million ton in this financial year.
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Pallav Agarwal36:02
Sure, sir. And also, if I look at the network, it's worth about 2,700 crores as per the press release, and you require about 6,500 crores. That's close to three times price to book. So is this factored in the future expansion that can happen?
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Jayant Acharya36:25
No, the current price at which this is acquired represents multiple approaches: discounted cash flow and replacement cost. It's roughly a million-ton plant with a very new blast furnace commissioned last year. If you take a normative EBITDA per ton, the effective EV/EBITDA is significantly attractive. Plus, it has potential to expand capacity almost double in a short period. The valuation is fairly attractive. Also, its proximity to our Vijayanagar location is beneficial. On an expanded basis, the next 0.9 million can be expanded for 1,600 to 1,800 crores, making the overall investment very attractive.
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Pallav Agarwal37:33
Sure, sir. Just a second.
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Operator37:35
I request you to jump back in the queue, please. Thank you. Next question is from the line of Parth Ojha from Anand Rathi. Please go ahead.
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Parth Ojha37:48
Thank you for the opportunity and congratulations on completing the JV and extending the relationship with the partner. I have two questions. The first question is pertaining to steel prices. Recently, companies from Vietnam and China have taken substantial price hikes, and prices in Europe and USA are at reasonably high levels. Can you give a number of what we can expect as price increase in Q1 and H1 going forward?
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Jayant Acharya38:26
In April we increased prices, and we increased some price for flat products in May as well. We increased 2,000 in April and 1,000 in May for flat. Our belief is that for now the price will be range bound. We will watch the geopolitical situation and then take a view. As of now, we believe this would be range bound going into this quarter.
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Parth Ojha39:25
Okay, and any idea on the hike we can expect from the auto sector?
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Jayant Acharya39:31
I will not be able to give you numbers here, but as we close the things, it will come out.
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Parth Ojha39:38
Yeah, my second question is pertaining to your analyzed CAPEX run rate of about 30-35,000 crores going forward. I believe you are comfortable, but going forward at 35,000 crores of CAPEX, would you start opting for more debt because in the near term your cash flows might not match?
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Swamy40:14
This is Swamy. If you factor in the incremental capacity which will be available fully from now till next 1.5 years, including JVML (1 million more), BF3 (2 million more), and Dolvi 80 (expected in CY27), these three put together create almost 8 million tons of extra production, generating anywhere between 9 to 12 thousand crore of EBITDA which is not in my base today. So even if we stretch to 30-35,000 crore of CapEx, a part will be funded with new cash. We are not going to create very large stress to increase debt. Temporarily debt could go up, but given our current net debt to EBITDA of 1.8, and expectation that leverage in FY27 will improve especially after the second tranche of JV, we think we'll be very comfortable.
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Parth Ojha41:58
Yeah, my quick understanding was that Dolvi is expected in CY27, so the incremental benefit would be only from FY29 onwards. So for FY28 and FY29, there would be some increase in debt, right?
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Swamy42:18
No, not really. You will have BVM L which will produce entire 5 million in FY27. Then BF3 will have some positive in FY27, not fully, that comes in FY28. In FY28 you will also see Dolvi's part volume, could be small. This combined will create incremental cash not in our base year. Without Dolvi, at least 4 million tons you will see between now and FY27 including BMM volume. That will give additional cash flow. Dolvi will start kicking in after October '27 to December '27 quarter.
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Parth Ojha43:07
Thank you.
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Operator43:08
We'll take our next question from the line of Shubham...