JSPL becomes biggest wealth creator among peers

Thomas Abraham KS Badri Narayanan Bangalore/Chennai | Updated on April 09, 2021

Stock has surged 486% since April 2020

For the world economy, financial year 2020-21 remains one best forgotten. However, that is not the case with domestic private sector steel makers, especially JSPL.

The company’s stock climbed from ₹63.20 levels in the early part of April 2020 , to ₹370.55 on April 1, 2021, recording a 486 per cent surge during the period. This, perhaps, is the highest return generated among shares of major steel makers in the country, and consequently, the scrip could be considered as the biggest wealth creator in the steel sector during the financial year. In comparison, shares of JSW Steel, SAIL and Tata Steel gave returns in the range of 200-300 per cent.

Metal stocks were in the limelight on Thursday as well. JSPL surged 6.95 per cent to ₹415.75 while SAIL jumped 6.5 per cent to ₹95.65. Tata Steel rose 4.90 per cent to ₹917.65 on the BSE.

Despite FY21 being marked by the national lockdown and plummeting demand, JSPL’s production climbed 19 per cent to 7.51 million tonnes, while sales rose 20 per cent to 7.28 million tonnes. The company’s March sales jumped 61 per cent to 786,000 tonnes, while production rose 21 per cent y-o-y to 7.3 lakh tonnes, during the month.

‘15:15:50 target’

VR Sharma, MD, JSPL, said, “The remarkable turnaround and growth of JSPL during an exceptionally tough Covid-19 year has been possible due to our single-minded focus on providing solutions to our customers. Our employees have ensured that our plants are always operating and we produce world-class products for our customers everywhere. We are committed to contributing to a self-reliant India. We are also working to achieve our 15:15:50 target, that is, ₹15,000 crore EBITDA, ₹15,000 crore net debt and ₹50,000 crore gross turnover.”


Record production

Overall, the steel sector has done well since the beginning of the year 2021, thanks to pent-up demand, and higher exports. China’s stoppage of supplies to Vietnam led to gains for Indian steel makers.

During the year, JSPL achieved the highest-ever production in plates, TMTs, wire rods, and billets. In March 2021, JSPL clocked the highest-ever sales of TMTs at 2.11 lakh tonnes. Average TMT sales, including exports, stood at 1.8 lakh tonnes per month. In the nine months for the year, TMT sales at JSPL stood at 1.62 million tonnes – during the lockdown the TMT market remained closed for 3 months.

Deleverage to help

Starting the year with a debt of above ₹36,000 crore, the company has reduced it to about ₹25,000 crore — a reduction of about ₹11,000 crore. Expecting the current rate of high demand and profitability to remain intact, Indian steelmakers are likely to embark on new capex going forward, say experts.

“We expect deleveraging will continue and JSPL is well poised for future growth. Volume growth in steel and power will help JSPL’s EBITDA to remain elevated despite expectation of softening of steel prices,” said Centrum Broking.

IDBI Capital said: “We anticipate steel prices to remain firm in FY22 which should likely accelerate JSPL’s deleveraging plans. Jindal Power is likely to witness turnaround in its financials over FY21-23, in our view. With no major capex, focus on debt repayment and unutilised capacities, we believe JSPL stock is likely to be a re-rating candidate over coming few years.”

Published on April 08, 2021

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