Steelmakers ready to fill void left by Chinese firms: JSL's Abhyuday Jindal

It’s also not far-fetched to hope that several markets within and outside the country may be vacated by Chinese players and Chinese goods, says Abhyuday Jindal of JSL
Jindal Stainless (JSL), the largest maker of stainless steel, is branching out to new export markets in Korea and South America as domestic demand is unlikely to see any uptick before the December quarter of FY21. Managing Director ABHYUDAY JINDAL tells Jayajit Dash how the company is keeping a flexible production schedule to align with customer demand. Edited excerpts:

Steel demand is likely to contract in FY21. Will stainless steel demand also suffer? How do you plan to stay profitable in FY21 amid Covid-19 shadow?

The stainless steel industry, like many others, is bound to witness contraction in FY21. April was a washout. From May, we started seeing incipient signs of recovery. In June, we expect to do double the volume of May. Demand for stainless steel should recover from the December quarter. We expect to touch full capacity utilisation by end of September.

The easing of the lockdown has improved demand. Centre spending on infrastructure will keep the demand of stainless steel stable in the coming quarters. Demand growth induced by Covid-19 in the area of health care and two-wheeler segments is also expected to augment our top line. It’s also not far-fetched to hope that several markets within and outside the country may be vacated by Chinese players and Chinese goods. Our company, and in fact, the entire stainless steel sector of India, is more than prepared to fill this void as it emerges. 

Your exports have seen an uptick lately. Is the demand picking up from existing markets or you’ve tapped into new geographies?

We have been exporting to the EU (European Union), West Asia, Asia, and Russia. Our exports constitute 18-20 per cent of entire sales. However, as a Covid-19 counter strategy, from April, we started chasing export markets more aggressively, reaching out to markets in Korea, South America, while also serving traditional export markets. In May, exports comprised more than 40 per cent of the entire share of JSL despatches. In June, export volumes are expected to be back to pre-Covid levels. We will keep chasing exports till domestic demand picks up.

How are you containing costs and optimising operations?

We are following a flexible production schedule to align the manufacturing of products in ‘batches’ in keeping with end-consumer needs and market demand. This enables our casting schedule to run without any restrictions. We have optimised the entire supply-chain mechanism and are ensuring that our products are moving easily according to the requirement of the customer. This has significantly optimised our costs. We are also stocking material in our yards in keeping with demand, to avoid overstocking.

JSL exited the CDR framework in March. How do you plan to pare debt and deleverage non-core assets?

The exit from CDR underlines the improvement in JSL’s liquidity profile and profitability. We have reduced JSL’s debt by Rs 1,074 crore in the past two years, and our focus on deleveraging remains intact. We have already completed asset monetisation plan earlier to restructure our assets.

What is your capex guidance for FY21? 

We do not have any large open capex commitment. The good thing is that we expanded our capacity to 1.1 million tonne per annum (mtpa) from 0.8 per mtpa last year, about 35 per cent increase, through debottlenecking and process improvement. We have similar plans for this year. On new capex, we will tread cautiously in the current scenario and take decisions based on market dynamics and business progression, and impact on Ebitda growth.

What new innovative, value-added products do you aim to add to your portfolio to beat demand blues?

Stainless steel lies at the highest spectrum of value-added products in the steel family. For the end consumers, we are planning development and launch of a new grade of product that addresses health concerns. The company plans to unveil a new grade of anti-bacterial ferritic stainless steel in the hollowware (utensils) segment. The product is in trial stage. We’ve put together a cross-functional team to assess real-time demand, predict upcoming demand, and align our products and production accordingly.

How difficult will be fund raising for steel makers and JSL?

JSL successfully exited CDR by paying Rs 275 crore recompense in full cash to existing lenders and entirely paid OCRPS (optionally convertible redeemable preference shares) to absolutely eliminate any equity dilution risk. Second, we raised Rs 800 crore fresh debt in February/March, just in time before the Covid-19 crisis hit the market. We are hopeful that the government’s relief package will improve overall business sentiment, and eventually strengthen our balance sheet.

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