Will be doubling capacity by next year without debt: JSPL

Targeting to be a debt-light company, Jindal Steel and Power Limited (JSPL) plans to significantly reduce debt in six months. Currently, JSPL’s debt stands at Rs 25,000 crore with international business contributing Rs 12,000 crore.Speaking to CNBC-TV18, Chairman Naveen Jindal said that with better results, improving earnings before interest, taxes, depreciation and amortisation (EBITDA) combined with blast furnace starting production the company is will see a big jump in debt reduction.Jindal said the company is looking to double its capacity in a period of one year. He said it is targeting to do so without raising any more debt.According to him, doubling of capacity will result in a significant reduction of cost of debt. The cost of debt will spread across 6 million tonnes instead of 4 million tonnes at present, he added.On divestment, Jindal said though Japanese investors are keen on investing, he said the company is not desperate for funds, especially at the cost of valuation. He however was quick to add it is open to investments but only on their terms.He added the company is willing to divest only those assets which are unproductive or uncritical assets but stated there are no such assets to divest anymore. While admitting last few years have been bad for steel industry, Jindal says the company faced all the challenges efficiently and believes that things are improving and demand is seeing a significant pickup.According to Jindal, optimally operating existing capacities optimally will create far more value instead of expanding.Below is the verbatim transcript of Naveen Jindal’s interview to Anshu Sharma on CNBC-TV18.Q: What does the company’s debt picture look like? Is there any timeline to bring down the company’s huge debt?A: JSPL standalone debt is only around Rs 25,000 crore, only the steel business. A lot of times, people do not understand the whole thing. When they talk about JSPL debt being Rs 46,000-47,000 crore, that is not JSPL standalone, that includes JPL. JPL has 3,400 megawatt of power, of IPP and that has around Rs 9,000-10,000 crore of debt in JPL. And then, internationally, we have Oman, we have investments in coking coal. Coking coal mines in Australia, in Mozambique. There also, we have invested, there is a debt of more than around Rs 12,000 crore internationally. So, JSPL alone is only Rs 25,000 crore out of which Rs 7,000 crore has been, I would not call it restructured, none of our debt has been restructured as such, we have gone in for 5:25, that is only for around 7,000 crore. There is some stress, but things are getting better. Our results are getting better, earnings before interest, taxes, depreciation and amortisation (EBITDA) is improving and as soon as the blast furnace starts, it will be a big jump.Q: But still, the debt is still there. What is the plan? How do you do it, just by improving your efficiencies?A: No, not efficiency, by, we will almost doubling our capacity in the next year. So, we are not increasing our debt. Keeping debt the same when we increase the capacity to double, instead of making four million tonnes, once we make more than six million tonnes in India, this whole, our debt cost, our interest cost is going to be spread over six million tonnes. And the prices in steel have improved. So, we hope that from now on, say after six months, we are going to actually start reducing the debt and after a year, we want to start reducing the debt substantially.Q: Will you look at divesting some of your assets if there are any buyers? There have been some reports on Japanese investors coming in.A: That was not for divesting. Japanese investors were only coming in with their equity investment into JSPL. They still remain very keen. So, it is just a matter of timing because last few years, they have not been good for steel industry, but now the tide has changed. Things are getting better. There is more demand. All these challenges have made us very efficient. But we are always looking at some unproductive assets, we are always willing to divest them or certain assets which are not really critical to us, we are always looking at divesting them. But now, there aren’t many things that we want to divest.Q: Will you still look at investors?A: Sure, if somebody wants to invest on our terms, we would welcome that, but we are not desperate for taking any investments at any price. We want to, whatever the company is worth, if somebody wants to come in at the right value, we would welcome that.Q: So, will you be looking at monetising from your Oman business because that is something that is doing well. There have been a lot of times we have heard in the news that it will go for listing. So, what will be the time line, what will be the valuations and when exactly will you do that?A: Again, if somebody comes with the right numbers, which reflect true value of the unit of the company, we will be happy to get that investment. If anything, if anybody wants to buy us cheap, sorry, we are not desperate for that.Q: But, will you not look at listing it?A: Listing, right now, no. But whenever there is the right time for listing, we can look at that also.For full interview, watch accompanying videos...