Jindal Steel & Power aims to cut debt to half by FY23

Twesh Mishra New Delhi | Updated on August 31, 2020

VR Sharma, Managing Director, JSPL

Company completely shifting focus away from mining coal, says MD VR Sharma

Jindal Steel and Power Ltd (JSPL) will be cutting debt to half by FY23 as a part of its efforts to evolve with the changing nature of business. The group will also completely shift away from coal mining and will instead focus on processing at gasification units and sourcing from Coal India Ltd (CIL).

The company expects an abundance of coal and now wants affordable prices for the fuel, said VR Sharma, Managing Director, JSPL, in an interview with BusinessLine. Excerpts:

How much debt do you have right now on JSPL’s books? What is the reduction trajectory?

We had a debt of ₹34,000 crore at the beginning of this year, we have reduced it by ₹1,380 core in the first quarter. In the current quarter, we will reduce debt by ₹1,500 crore. We will reduce ₹5,000 crore of debt this financial year. The group aims to have a total debt of ₹15,000 crore in FY23. Our aim is that earnings before interest, taxes, depreciation, and amortisation (EBITDA) should be ₹12,000 crore and sales turnover should be ₹50,000 crore. The current sales turnover on a consolidated basis is ₹42,000 crore.

How did Covid-19 affect your business?

We knew that the domestic market was not going to continue, so we charted out a new policy in the very first few days of the lockdown. We started exporting day-in and day-out and that was a saviour for us. The Ministries of Railways, Shipping and Ports, and Steel came to our aid. This is because the Railways could carry our goods to the ports. We were operating out of the ports of Paradip, Gopalpur, Gangavaram and Visakhapatnam. Since outgoing cargo was very less, the railway rakes were available on call and they were very cooperative.

This is how we could do close to 1 million tonne export in the lockdown period from March 22 to June 30.

In July, the domestic market partially opened and we started getting orders. We used to export about 75 per cent of the total steel produce in the first 100 days. In July, we did around 40 per cent of the total and in August, it will be 30 per cent of the total production. In the first quarter of this year, we could make peak profit, highest in the 30-year history of our country. We could run our steel plant at 85-90 per cent capacity.

Power was slow to grow because of a slump in industrial demand. We could maintain a plant load factor of 55 per cent, which has now risen to 78 per cent.

What is your outlook on coal availability and where is the scope of improvement?

Coal is not the talk of the town now. The reason being that it is available in abundance and after 2050, coal will not be required around the world. This is because the world is moving from coal to different sources of energy such as gas, wind, solar, hydro, and nuclear. India is importing around 250 mt of coal; it is equivalent to 500 mt of high ash domestic coal.

Taking forward this outlook, JSPL had started its coal gasification unit in 2014. This plant is running, it converts coal to gas, and then gas to DRI (direct reduced iron) and then DRI to steel.

The government needs to sell the coal under the ground to utilise and take the leverage of the situation. Otherwise it may remain buried under the ground for another billion years. So, it is good that CIL increases production. With increased production, there is no need for having private mines. The need for privately owned mines comes only if CIL does not increase coal availability to meet the demand.

Why should the private industry like ours put our heads inside the mines? This being accompanied by many hassles of multiple clearances. Let CIL do its business and supply coal to everybody.

The government has also set a target to gasify 100 mt of coal. This should be scaled up to 200 mt and all oil companies of the country should have a mandatory task of producing produce a fourth of their output through coal. It can be used for converting to methanol, liquids, diesel, benzene, petrol, plastics.

Burning coal in the open is not friendly, but converting it into gas is a very clean process.

What will be the fate of coal mines being auctioned?

We are not interested in mines. We are interested in coal at a price that keeps energy affordable. Producing electricity at pithead power plants should not have more than ₹1.20 a unit as coal cost. At a coal cost of ₹1.20 a unit in electricity prices, CIL has to supply coal at a price of 35-40 paisa per megacalorie. At a higher price, selling coal will be tougher. We just want coal at a price of around 40 paisa per megacalorie. Presently it is available at around 55 paisa per megacalories on an average. We want it to come down.

Published on August 31, 2020

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