Naveen Jindal talks about, among other things, his plan to keep working on cutting his company’s debt by Rs 5,000 crores to Rs 6,000 crore for three consecutive years and listing JSPL’s Oman unit.
Naveen Jindal, the chairman and promoter of Jindal Steel & Power, pulls no punches. That quality stood him in good stead as he scripted a turnaround of his company that at one time was close to being dragged to the insolvency court. The company recently reported a standalone profit after 13 straight quarters of losses. It may not be a necessity anymore but Jindal remains open to selling some of the company’s mining assets in Indonesia and Africa.
Jindal tells Moneycontrol that JSPL has extended its pact with JSW Energy to explore sale of its 1,000 MW plant at Tamnar in Chhattisgarh, all at the right price. JSW Energy belongs to his elder brother Sajjan whom he calls ‘bhaiya’.
The youngest son of late OP Jindal continues his fight as he talks about his plan to keep working on cutting his company’s debt by Rs 5,000 crores to Rs 6,000 crore for three consecutive years and listing JSPL’s Oman unit. The lament over importing coal in a coal-rich country and the passion behind inspiring private entrepreneurs to set up power projects in the country are all too noticeable in the polo player.
Here are the edited excerpts of his interview with Moneycontrol:
Q: You now have a 9 million tonne steel capacity at a consolidated level. That’s close to your rivals’. But they have gone and acquired more capacities under the Bankruptcy code. Tata Steel has acquired Bhushan Steel and JSW is in race for Monnet Ispat. Don’t you think you would be left behind? Are you looking at expanding capacity further?
A: So we have always been a leader in our segment, so whatever we produce. We produce India’s widest plates. We produce one of the world’s longest railroad rails. We make India’s widest beams. So JSPL is a leader in many, many segments in steel industry and we will continue to be that. And as far as other people increasing their capacities is concerned, that’s going to only help the steel industry and JSPL will also not be far behind. If today we are number four in the private steel people, we will continue to hold that number or even we are going to be increasing our capacity, we will also going to be increasing our capacity. So we are going to play an important role in the steel industry.
Q: You reported profit at a standalone level after three years. But you are still making losses at a consolidated level. When would that report a profit?
A: Consolidated (profit) also I think is also very far. We are not getting the kind of results that we expect from Jindal Power inspite of having 3,400 MW power project which is 100 percent ready and can start supplying power but we are operating at 45-50 percent level just because of shortage of coal but I do hope that in the times to come that Coal India will improve its performance, increase the coal supply and that we will be able to run it on 100 percent capacity.
Q: Are you importing coal?
A: We are importing. It is unfortunate but we are importing some coal to Chhattisgarh. Chhattisgarh is not close to a port and where we are located, we are surrounded by coal all around and still we are importing coal. So it’s like the famous saying called importing coal to Newcastle, same as importing coal to Chhattisgarh. So it is unfortunate. I hope that we don’t have to resort to imports for long.
We are importing about 100,000 tonne per month and I don’t know when it will get resolved but I real feel that if more mines are started and if whatever Coal India and its subsidiaries SECL, MCL, whatever mines they have, if they operate them at the rated capacity for which they have the environment clearance, there will be no shortage of coal in India.
They really need to improve their performance and produce at their rated capacity, there will be no shortage of coal, power will be available, power prices will reduce in the market and people will have 24 hours of power, uninterrupted and at low prices.
Q: Have you been impacted adversely as a result of the US imposing tariffs on imports of Chinese steel?
A: We were hardly doing, making any exports to the US and by USA imposing all these tariffs on other countries, it has really improved the markets in the US, steel prices in the US are 20 to 30 percent higher than the international prices but that does improve the sentiment rest of places also and government of India also has done a remarkable job by imposing minimum import prices, anti-dumping duties on different products when some of the countries were resorting to dumping into India.
I am sure if such a situation was to arise again the government will also play its role to stop that because steel is a very important industry for Indian economy and millions of people are employed in steel plants. So I am sure the government will protect the industry.
Q: How do you see steel prices and your margins in the future?
A: We are confident that steel prices would remain stable. Steel is available cheaper in India than what it is available internationally. So we are very competitive. We do suffer from very high taxation. Very high taxation in the sense we are paying the highest royalty on iron ore in the world and highest at least by double, highest royalty on iron ore, highest royalty on coal, then district mineral fund on top of that. Then we pay GST cess on coal, Rs 400 (per tonne).
So all these things make us uncompetitive internationally because of the high incidence of taxation. Then there are issues with the logistics, logistics is because many of our plants are land-locked. Railways is very expensive in India and the rakes are not available, there is a shortage of rakes. So now railways has come out with a good policy of own your wagon. So we are going to participate in that. So hope that this issue in next one year will also be resolved.
FY19, we hope to produce more than 9 million tonnes including 2 million tonnes in Oman. So we hope to produce from our present level, last year we have produced just over 4 million tonne (locally). This year we hope to produce over 7 million tonne, we are looking at an increase of more than 70 percent.
Q: Are you happy with the current level of debt or are you looking at further reduction?
A: We are not happy. We are able to happily service the debt. That’s not an issue. But definitely going forward, we want to have at least, not more than half the debt we have right now in the next three years I would say. It had peaked at a level of around Rs 46,000 crores. Presently, we are around Rs 42,000 crores. Every year, we expect to reduce it by Rs 5,000 crores to Rs 6,000 crores. We will be able to very comfortably manage (the debt reduction) through our internal accruals and our own cash flows.
Q: You hold a lot of mining assets abroad and you haven’t really been able to sweat them out. Are you looking at improving the utilization there or looking to exit any of them or sell part of the stake?
A: We are looking at improving the utilization. We have coking coal mines in Mozambique, Africa. It has tremendous potential. We are investing in it. In fact in the next couple of months, our project would be complete there and our production is going to more than double in Mozambique. Similarly in Australia also, we have very good quality coking coal. There also, every month, we are improving our capacity utilization. And there also, there is tremendous potential.
We are giving it the focus that it requires now because once the operations in India, now that they have stabilized, we are able to pay more attention to them and also support them more to really come up with their production.
Q: You had last year signed a pact with JSW to sell off 1,000 MW capacity. That deal hasn’t fully fructified. Is it off or are you still in talks with them?
A: We have extended the timeline by one year and that’s not very important now. This 1,000 MW that we talk about selling to JSW is that historic power project which has led to dozens and dozens of people actually investing in power. This 1,000 MW power project was the first 1,000 MW mega power project built by the private sector, first mega power project and its success led to addition of at least 60,000 MW to 70,000 MW.
If you see that in India today there is so much of power capacity is available and that even though coal prices have shot up but still the power is available, power is available at an economical price is thanks to this project. This 1,000 MW project set up by Jindal Power in Tamnar in Chhattisgarh which encouraged and inspired so many entrepreneurs to set up power projects.
If it happens at the right price, we will sell it. If we are not able to get that, then we are very happy to keep it because we do know that there is a requirement for power in the country, our per capita power consumption is very, very low. As more and more houses get electrified, they have electricity connection, as our quality of life improves, so is the power consumption going to improve.
Our power consumption per capita is only around 1,100 to 1,200 kwh per person per annum which can easily be 2,000 kwh. In developed countries, it is more than 15,000 kwh. In US, it is more than 20,000 kwh. Our power consumption is very less which is increasing every year. And ours is a very efficient power project. We used to operate at more than 100 percent, 101, 102 percent plant load factor. And I am very confident that after about a year or so when the coal situation improves, we will again be running at above 90 percent plant load factor.
Q: You may not need to sell assets anymore to cut your debt. But are you still looking to sell off some of them?
A: Most of what we had to sell, we already have sold. But yes, we have certain assets internationally, certain mines in Indonesia or in Africa that if we get good proposals for those, we have an open mind for divesting those. We could exit.
Q: What about Oman? Are you looking to list the arm there?A: Oman, we have our options open. We will start looking at that three months down the line. How do we monetize that? By doing a fresh equity or by simply having a strategic investor. There is a lot of interest in Oman. So we will see. We are not really pumped up. But Oman is producing well, it is giving good EBITDA. So it is doing well.