Seshagiri Rao, joint managing director at JSW Steel helped steer the company’s steel making capacity from 1.6 million tonnes per annum (MTPA) in 2002 to make it India’s largest private sector steel producer with a capacity of 18 mtpa. In a interview, Mr. Rao talks about plans to increase the capacity by 2.5 times to 45 mtpa, competition from international players, and resolution under the IBC process. Edited excerpts.
What’s your take on the Binani Cement judgment by NCLAT? Does it help your case for Bhushan Power, given your revised bids are higher than the Tatas’?
This judgment clarifies that maximisation of value can be done till the resolution plan is approved by the adjudicating authority. But it has to be achieved within the process of the IBC. If I understand the judgment correctly, a resolution plan can been improved until it is approved by the adjudicating authority. The second is balancing the interest of all stakeholders. [However] if the value of the assets is less than what secured lenders get, then how is it possible to balance the interest of all the stakeholders? In that case, the judgment says that all should get proportionately. That’s one area [where] we need more clarity. This can alter the evaluation of bids, as the evaluation, in my view, is not done based on the proportionate consideration. These two issues need to be finally confirmed.
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Isn’t it unethical or mockery of IBC process when you are allowed to revise your bids three times from ₹11,000 cr. to ₹19,700 cr. now?
It is a resolution, it is not a recovery and it is also discussed in the case of UltraTech judgment. So, it is resolution with maximisation of value as its objective. When we submitted the bid for Bhushan Power and Steel, our bid being lower, we moved on. Subsequently, another bidder submitted a bid later than the due date and NCLAT had given directive to the Committee of Creditors (CoC) to consider that bid. Therefore, the rule of the game is any bidder can improve the financial offer.
So, when that opportunity is there, and someone else avails that opportunity and we do not avail that offer, it is not the right way to approach things. That’s how we came back. There is huge gap between our improving our offer vis-a-vis the actual finalisation of bids.
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If your revised bid is not higher than the Tatas’, why would they go to the NCLAT?
My understanding is that they went to the court saying that nobody should be allowed to bid after the deadline.
Do you see ArcelorMittal and other global players coming to India impacting the existing players and change the competitive landscape?
Steel is a global commodity, whether you are in X country or Y country, you have to compete globally. After liberalisation in 1991 till 2016 , anybody could have exported steel to India as the duties were lower, whatever imports were there, we were competing with them. Similarly, if you see the exports of steel from India from 1991 till 2007 , we were net exporters of steel. JSW at that time exported 40% of its production. We were not exporting to some unknown markets but developed markets. India is an open market and anybody can compete globally, steel is a globally traded commodity. We are exporting and also facing import competition, so I don’t think it will change the landscape and create any issues in India.
Why do we suddenly see global players eyeing India. Is it assets under IBC or something else?
India is a growing economy and if there is any country in the world where you see 7% plus steel demand, it’s India. We had 91 million tonnes of steel demand last year and it is expected to be 230 million tonnes in the next 10-12years. It’s a big growth opportunity in India.
How healthy will be competition from ArcelorMittal?
We think any competent player with technology coming into India will bring in healthy competition, which we welcome. Earlier, the small players were desperate to sell products at any price. So it is good today if any strong player is coming and will bring in healthy competition. Geographically, we will be the leading player in West and South.
Under IBC, you missed big opportunities like Bhushan Steel and Essar Steel, and had to be content with Monnet Ispat. Your take?
Wherever we have submitted our bids, we were very competitive and given realistic numbers. If the competitors have given a better price than us, it is fine, but we don’t think we have missed a better opportunity.
What’s the road ahead for JSW Steel now?
We are expanding our capacities by 40% from 18 mtpa to 25 million. We have also done some acquisition in Europe. In the long run, we plan to have 45 mtpa of capacity by 2030 to maintain our 15% market share.
We are planning to almost double our Vijayanagar steel plant to 23 mtpa from 12 mtpa now. We also plan to double the Dolvi plant capacity to 12 mtpa. Monnet Ispat is 1.5 mtpa now with scope for further expansion. We recently signed an MoU with Odisha government to set up a 12 mtpa greenfield plant for ₹35,000 crore.