Jayant Acharya: ‘Demand will come back after the elections’

‘The Budget will be positive, continuing on the path of growth taken so far.’

Photograph: Kind courtesy JSW Steel

The consolidated net profit of JSW Steel dropped sharply in Q4FY24 on a year-on-year basis.

In an audio interview, JSW Steel’s joint managing director and chief executive officer, Jayant Acharya, tells Ishita Ayan Dutt/Business Standard that Q1FY25 will be better and outlines the capex road map.

JSW Steel’s net profit in Q4FY24 dropped by nearly 65 per cent. Will Q1FY25 be better than Q4?

It will be. We had guided that costs will go up in Q4. Unfortunately, prices were also subdued because of lower-priced imports and pre-election destocking.

That resulted in a lower margin.

But we did quite well in terms of market perspective.

The Ebitda for FY24 (full year) was at Rs 28,236 crore – it was the second highest for JSW Steel.

This year, we are adding 8.5 mt of capacity between JVML (JSW Vijayanagar Metallics Ltd), BPSL (Bhushan Power & Steel) and debottlenecking at Vijaynagar at one of our furnaces.

In addition, we have now launched phase three of Dolvi. Our capex in this is around Rs 19,200 crore – it will be one of the best capex costs in the world.

We will be starting this now so that we complete it by September 2027.

It will be funded through internal accruals and cash flows.

This year, we will spend Rs 20,000 crore of capex and Dolvi will be a part of it.

Demand had slowed during elections. Is the market still muted?

Demand in the last quarter did slow down a bit because of lower-priced imports and pre-election economic activity slowing.

This will come back after the elections.

The Budget will be positive, continuing on the path of growth taken so far. So, I don’t see any change from a demand perspective.

Last year, we had 16 million tonnes (mt) of incremental demand in India and this year even if we go by Q4, which was a weak quarter, we will add 12 mt.

I don’t see 12 mt of capacity coming up in India this year.

Even in the next two years, supply could lag demand. But imports are certainly a concern.

Although some economic activity improvement has been seen in China, still, the demand is slower and exports are happening at a higher level.

So, we have to be very conscious as a country to see that we don’t get impacted by unfair trade since we are one of the fastest-growing countries in the world.

The US has raised tariffs on Chinese steel. Is there concern that some of the material could get diverted to India?

The US has taken some steps on some products, which are mostly electric vehicles, semiconductors, batteries and some steel, aluminium.

However, the impact on the overall size of import-export may not be that large.

But it is important for us to understand the China story because we are geographically close.

Therefore, we do see a concern because of the higher level of exports from China.

Last year, India saw a 93 per cent increase in imports from China.

Therefore, it is an area of concern for us. It is time for India to look at it carefully and, like other countries, make sure that we are not impacted by low-priced imports.

Steel prices increased in the last month. What is the outlook on demand and price for FY25?

We have grown at 13-13.5 per cent every year for the last two years. I do see a strong growth this year as well.

The prices have bottomed out – the levels reached in Q4 were not viable. So, we will see a better pricing scenario. Costs should be lower with coking coal prices coming down.

With better pricing and efficiencies, we expect margin improvement.

Have you worked out the investment required to take you to your target of 51 mt by FY31?

Yes, we have. But what we can say now is that in the next three years, we would be investing close to Rs 65,000 crore including the new capex announced for Dolvi.

We are focusing on brownfield expansion for our next level. Dolvi will take us to 43.5 mt steel and we will be in the top five steel producers in the world.

For the next phase of expansion, we will be in a better position to further add brownfield capacities.

And we are going to be looking at starting on Odisha at some time – we will calibrate between our two assets there.

That’s how we will structurally go up to 51.5 mt including our US operations by FY31.

For captive sourcing of coking coal, the board has approved acquisition of Minas de Revuboe in Mozambique. What is the capex envisaged over the next few years?

This is a pre-development mine in Mozambique, which has JORC (the Australasian Code for reporting of exploration results) reserves of more than 800 mt.

It’s prime hard-coking coal and one of the very few assets of this size left in the world.

We have acquired 92.19 per cent at about $74 million. We will close this acquisition this year after the customary approvals required for the asset and start development.

Logistically, this is closer to India and therefore it will be cost-effective for our Indian operations.

When do you see global demand coming back?

Last year, it was actually the rest of the world which was growing and not China. This year also, China is flattish but world demand is expected to grow by 30 mt.

Out of this, close to 40 per cent will come from India. Good thing is that the rest of the world, other than China and some of the impacted areas, will grow.

Europe has bottomed out. Stability is returning in spite of geopolitical challenges. The world has done better than what we expected.

Are you seeing migrant workers leave to vote for elections?

We did see some outflow of migrant workers in our project operations who went back to vote, especially at Vijaynagar where the expansions were going on.

Also, it typically happens during the summer months.

But this time, because of elections, some additional manpower would have gone back.

Post-monsoon that should normalise.

But the propensity for labour to work in their own areas is much more post-Covid.

Therefore, you need to train more people from different parts of the country and attract them to come and work.

Feature Presentation: Aslam Hunani/Rediff.com