Joint Managing Director & CEO, JSW Steel Limited
Why JSW Steel Is Bullish Despite Rising Costs & Global Uncertainty | Jayant Acharya On Q1 FY27
JSW Steel reported record sales and highlighted strong domestic demand during the quarter. In this conversation with NDTV Profit, management discusses what's driving growth, impact of the Middle East conflict, Q2 challenges, and why it expects a much stronger second half of the year. Watch!
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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)
H
Host0:00
Joins in as well with the highlights and the conversation with the management is what you will be taking forward, Nisha.
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Nisha0:05
Interesting set of numbers that we've seen from a metal counter. Everyone wants to now know as to what's going to happen with the West Asia crisis as well, but from an earnings perspective, what did the quarter look like?
H
Host0:17
So, two important things are really here that really played out. One is the global, you know, price support. It's a global traded commodity and therefore the pricing has been higher because of West Asia. That anyways we had predicted and projected. The second important thing is the demand. Jayant Acharya is joining in from JSW Steel to take us through the quarter. Now, Mr. Acharya, always a pleasure speaking to you on NDTV Profit. Of course, good set of numbers, record sales numbers backed by demand as well as pricing. Take us through the internals in terms of the key factors and the drivers in the quarter.
J
Jayant Acharya0:56
The quarter one has seen a very strong operational performance. India demand I think was one of the basic drivers. It grew at 8.3% the steel demand. And that has driven good growth. Our capacity utilization excluding BF3 was at 94% and that quarter on quarter basis showed a volume growth of 15%. On production side while on the reported number it's 3.3%. Our sales where consolidated sales were good. We had a good mix of flats where the pricing and the demand was better. The product mix was also helped by value added and special products which helped the overall mix from an EBITDA point of view. The sales realization increase of about roughly 6,500 rupees quarter on quarter was offset partly by higher cost and a better mix as I've explained. So, that has played into a better result for the quarter.
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Host2:04
All right. So, good demand really playing out and of course you've written that autos, renewables, these are some of the segments. Tell us where is the demand really surfacing from? Are there new areas also developing for the steel companies to take benefit from?
J
Jayant Acharya2:23
So, first on the automotive, I think the automotive growth momentum has been really robust post the GST cut in September last year. Auto has been on a roar and I think it continues to do well. What we see is a very good traction in retail on the rural side where the consumption of passenger vehicles, two-wheelers have started moving up. Tractor sales are seeing good traction. I think that's a very strong one on the automotive side. On the renewable side, you're right. We had the highest again quarter here. We grew at 25% quarter-on-quarter. Sorry, YOY in the renewable space. We are expanding as you know all we're trying to go to non-fossil fuel in JSW Steel by 2030-31. Our effort is to see that we have everything through renewable energy. So, we are expanding our capacities on solar and wind ourselves. In addition to that, the renewable energy demand overall in the country as we require more energy for our own self-reliance, I think that overall in India is growing. Our facility plate facility at Anjar, our coated facilities are big suppliers to the renewable space and that is benefiting us overall.
H
Host3:48
All right. So, demand is strong and coming in from new areas well, but when we talk about pricing, there is a strong support coming in from international prices. EBITDA has been very strong 23% growth. Is this sustainable? Give us an outlook on the pricing as well.
J
Jayant Acharya4:07
So the prices, just to come to the price first, the steel prices started improving if you recall from Jan 26th onwards. Jan to March quarter, it saw increase in line with what happened globally. Part of that price increase is actually fully flowed on into the quarter one of this year and that has given us the tailwind price benefit. While during the quarter, the prices did moderate somewhat and flat, but the secondary market on longs moderated much more. In spite of that, we did deliver a good, I would say, NSR improvement on volume and mix both. Sustainability of the price: I would just like to say that the prices in India are among the lower ones if you were to compare with the many other parts of the world. We feel these prices are reasonable. However, there are seasonal impacts which do come in as we know during the July-September monsoon quarter. We should see better traction in terms of demand and prices as we go into H2. But quarter two will see increased volume from JSW Steel and that from our BF3 Vijayanagar operations and wire operations. That would improve our overall absolute EBITDA as we go into the next quarter. It'll be very difficult to put a number to what EBITDA or what margin would come next quarter.
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Host5:39
All right. So there has been some shutdowns also. So what has been the impact of the war so far? It has only benefited on the price front, but what about the supply chain and also the volume guidance for the next quarter?
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Jayant Acharya5:54
So this quarter, actually the last few months have been impacted geopolitically or aware. So whatever impact has been felt with respect to supply chain, with respect to elevated cost of energy, has impacted the cost in quarter one and some part of that flows into quarter two as well. We are hopeful that the Middle East conflict will get settled soon. It's difficult to say when. It remains a key monitorable. If you go into the demand for the full year, one thing good which we see is that the IMF has projected the world economic growth in 2026 to grow at 3%, marginally 0.1% lower than what they had earlier projected. So in spite of the Middle East conflict, I think that's a very resilient number. And they are forecasting that it will improve to 3.4% in calendar year 27. Therefore I think that's why I'm saying the second half of this year you will see more traction. We will also see a lot of reconstruction and rebuild in the world as countries recover from the war and start rebuilding infrastructure across various parts of the world. So we feel that the demand in India will be very strong. We expect about 7 to 9% growth. Our estimate is that we would have a demand close to 177 million tons, incremental 12 to 13 million tons. And with our JVML capacities fully playing out this year, BF3, Vijayanagar adding capacity, I think we are very well poised to take advantage of this demand improvement in India.
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Host7:42
All right, so very bullish commentary when it comes to H2, but let's really focus on Q2, which is seasonally weak quarter because of monsoons. So, how's the raw material prices really putting pressure or how is the outlook looking and the prices? Give us a guidance for this particular quarter, Mr. Acharya.
J
Jayant Acharya8:01
So, this quarter, you know, we see cooking coal prices going up by about 12 to $15 in quarter two versus quarter one. That would impact cost to some extent. Cooking coal prices have started lowering in the last 2 weeks or so, but major part of that benefit would flow into the subsequent quarter in quarter three of this year. Iron ore prices have also started correcting, which have been elevated for some time. And that also should benefit us between towards the later part of Q2 and Q3. Having said that, the impact of pricing is difficult to forecast, but there will be a seasonal impact on prices in the quarter two. However, we expect that H2 will be very strong. Our demand growth, as I said, in India is likely to remain robust. With this, we expect stronger volumes to be able to result in higher absolute numbers in terms of EBITDA.
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Host9:09
And you are planning to really expand at a scorching pace. JSW One will be a slight bit of monetization. Putting all together, give us a sense on debt EBITDA and what are the numbers you'll be comfortable with with the expansion plan in motion.
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Jayant Acharya9:27
So, net debt to EBITDA has improved now to 1.46, and we had given our comfort that we would like to be below 2.5 as we grow our capacities. We maintain that direction and we'll be financially prudent to see that that doesn't get disturbed when we grow. Net debt has reduced to 46,000 odd crores from the last quarter. And I think our balance sheet is now quite strong to be able to take advantage of the India growth story and go on our trajectory which we have already indicated to you. So yeah, hoping for the best as we go ahead.
H
Host10:05
All right. All the best, Ajanta Acharya. Thank you so much for joining us on NDTV Profit.