Naveen Jindal , chairman of Jindal Steel & Power Limited (JSPL), a part of $18 billion diversified O. P. Jindal Group, had tough time since 2014, when the coal blocks, prime source of raw material for his steel and power plants, were cancelled by the Supreme Court, leading to JSPL’s ballooning debt and losses. Mr.Jindal is now a relieved man after commissioning of India’s largest blast furnace in his Angul steel plant in Orissa. In an interview, the youngest son of late O.P. Jindal, also a former MP, talks about the group’s future plans and turnaround of JSPL after completing the largest blast furnace on Saturday. Here are the edited excerpts:
There is a concern about the huge debt of ₹46,000 crore on JSPL’s balance sheet.?
We will reduce our debt by increasing our production. With the commissioning of the blast furnace, we will be able to almost double our production this year. Last year, we had produced 3.5 million tonnes (mt) of steel in India and 1.3 mt of steel in Oman, so a total 4.8 million tonnes. This year, we will produce 6 mt of steel here (in Angul) alone and 1.5 mt of steel in Oman, so [the] total [comes to] 7.5 mtpa. That would help us improve our EBITDA tremendously and we will be in a position not only to service our debt but also reduce it.
There were plans of roping in a strategic investor at JSPL to reduce debt?
No. We are always looking for opportunities. If there is an investor who wants to come into the company, we will welcome that but on good terms. We are not desperate any more so we will welcome investors on our terms.
What about the deal you signed to sell your 1000 MW power plant to elder brother Sajjan Jindal?
It’s a deal with JSW. Today, looking at the kind of money a plant makes, valuation will be accordingly. That’s why it is very important that states come out with power purchase agreements (PPAs). Long term PPAs will improve our valuations for the plant. We still have time to complete the deal by June next year.
Why do you want to sell the plant?
This deal, we want to go through. There is a price band is a minimum of ₹4,000 crore but our endeavour would be to get upwards of ₹6000 crore at least for this plant. There are conditions precedent which we need to meet.
What happens to your plans of increasing your capacity four-fold to over 31 mtpa with investments of $23 billion?
Right now, looking at the market our focus is not on expansion or increasing our capacities but to sweat our existing assets to the maximum possible and reduce our debt. That is our priority. Our focus is to run our plant well and to make the most of the investments that we have already made.
How will you contribute to the government’s ambitious plan to reach 300 mtpa by 2030?
In two to three year’s time, when our situation will be stronger and we have a clear sight of being able to organise raw material, we will definitely play our role. So far we are contributing to steel making in India in a big way and we hope to continue that in future also.
Most of the steel firms are laden with debt. Do you think its possible to achieve the target of 300 mtpa by 2030?
I think it’s a challenging target. But… it’s good to have a challenging target rather than have a short target. Even if we come close to it, I think it would be great.
Banks are not willing to lend to the steel sector?
If the money will not come, plant capacities will not go up, so it has to happen. I hope demand picks up in the country and if margins improve, the steel firms they will automatically want to expand because all the time our minds are working on how to increase the capacities. Everyone really enjoys doing that. Right now, I think we are doing it at a good pace and our focus is to run our existing capacities to the fullest.
Last two years have been very bad for the steel sector. Do you think that the worst is over for JSPL?
I feel the worst is over for the steel sector. The prices are right and sustainable. We do have to improve on availability of raw materials and reduce the taxation. In India, we suffer due to excessive taxation and we pay the highest royalty in the world. On top of that there is district mineral fund, on coal there is this ₹400 of clean energy cess, on electricity that we consume, there is electricity duty and high state taxes.
All these things make us uncompetitive, especially when we are competing in our global environment because international companies are not paying these kinds of royalties.
Most of the states have joined the government’s UDAY scheme but still discoms are not buying power as anticipated?
I feel UDAY is good effort and lot more needs to happen. Power is a complicated industry, especially the distribution as there is big element of cross subsidy. There are lots of challenges but I think, over time, government has taken good steps and we are moving in the right direction.
The government has completed 3 years. As an industrialist, do you see things changing on ground?
The government has taken up many good initiatives and it takes time for the results. I must say that for steel sector they have done a good job in protecting the domestic industry by stopping the unfair imports that were happening. The thrust on infrastructure is going to augur well for the steel industry.
You have again been issued summons by the CBI in another coal case?
Recent charge-sheet by the CBI is completely baseless, frivolous, malicious attempt and I feel that we have a really good case and I am sure we will get relief from the court.
Do you think you had to pay a political price for being in business?
I don’t know that but what I know in my mind is that there is no coalgate. Something which six successive governments of India are following for more than 20 years, which led to lot of investments, lot of job creation… and cancelling those coal blocks, we have all seen how many steel companies and power companies have become debt-laden. Why are the banks having more than ₹6 lakh crore of NPAs? How come nobody talks about that?
Will you again be contesting the 2019 elections?
We will see to that, now my main focus is to make the company debt-free.
