JSW Steel plans to raise about ₹14,000 crore via equity share sale and debentures to fund expansion and acquisitions, as it plans to step up its steel-making capacity to 24 million tonnes per annum (MTPA) by 2022 through brownfield expansions at a cost of ₹48,715 crore.
Doubling capacity
The expansion includes doubling the capacity of JSW Steel’s Dolvi plant to 10 MTPA, capacity expansion of CRM-1 complex at Vijayanagar works, modernisation-cum-capacity enhancement at downstream facilities of JSW Steel Coated Products and strategic cost savings projects.
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The company’s board on Friday approved new investments of ₹5,700 crore. This includes downstream investment of about ₹1,000 crore, cost savings projects of about ₹2,200 crore and mining and sustenance capex of about ₹2,000 crore, thereby increasing the cumulative capex spend of ₹48,715 crore (net of capex projects put on hold during the year) over FY2018- FY2021.
With a cumulative cash outflow of ₹14,371 crore in the last two years, the company plans to spend about ₹34,300 crore over the next two years, with some spillover into FY2022.
“These projects are planned to be funded by a mix of debt and internal accruals. Our board has decided to raise ₹14,000 crore and we will seek enabling resolution at our AGM,” Seshagiri Rao, joint managing director and Group CFO, JSW Steel told
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The company’s net debt has already increased to ₹49,700 crore as on March 31, 2019, compared ₹38,000 crore in the year ago period.
Of the ₹14,000 crore, the company plans to raise ₹7,000 crore by way of non-convertible debentures and another ₹7,000 crore by issuing equity shares or fully/partly/optionally convertible debentures.
Net almost halves
The company’s consolidated net profit for the fourth quarter almost halved to ₹1,495 crore due to weakening demand, falling steel prices and increasing expenses. The fall in profits were reported on a 5% increase in revenue to ₹22,368 crore.
Crude steel production during the quarter fell by 3% to 4.17 million tonnes, due to planned shutdown at the Dolvi works. However, the saleable steel during the quarter rose by 2% to 4.29 million tonnes.
JSW Steel’s total expenses during the quarter increased 12.72% to ₹20,058 crore.
A slowdown in steel demand, growing imports and increasing cost of production were the major factors impacting profitability, Mr. Rao said. For FY19, JSW Steel’s net profit went up 23% to ₹7,524 crore on a 16% increase in revenue to ₹84,757.
Target production
The company produced 16.69 million tonnes of steel during the year, thereby achieving 99.6% of the crude steel production guidance of 16.75 MTPA for FY2019.
The company board has recommended dividend at ₹4.10 per equity share of ₹1 each for the year ended March 31, 2019. The total outflow on account of equity dividend including corporate tax on dividend will be ₹1,195 crore compared to ₹933 crore paid for FY2018.
JSW Steel shares rose 4.2% on the BSE to ₹287.65 in a firm Mumbai market on Friday, valuing the company at ₹69,531.3 crore.