India has navigated impact on costs and supply chains well: JSW Steel CEO Jayant Acharya

Underlying demand, operating leverage and balance sheet strength are giving JSW Steel the confidence to continue investing in growth, chief executive officer Jayant Acharya tells Nikita Periwal. The country's largest steelmaker has announced a fresh round of capital expenditure, which will increase its production capacity to nearly 65 mt by 2031. Edited excerpts:

How does continued geopolitical uncertainty impact the way boardrooms are thinking business?

The economy has been resilient in spite of the war. The IMF has upgraded India's growth outlook by 10 basis points to 7.1%. So while there are challenges in the world, the impact on costs and supply chains has been navigated well. The second is that the opportunities which certain markets are providing will continue to remain, especially in India. It is a mixed bag.


If you look at the steel consumption in India, it grew 7.5% in the first half in spite of the challenges. After some caution in Q1, demand picked up in Q2. The drivers are structurally strong and local in nature.

What has the September quarter been like?

Our strong revenues were driven by sales, and we added to sales by liquidating 200,000-210,000 tonnes of inventory. Usually you will not see a drawdown of inventory in Q2, so what it indicates is that demand on the ground is very strong.

With demand turning out the way it is, does it give you headroom to hike prices?

We have seen a recovery in prices, which is fundamentally because of the demand. What we have been able to do is the highest-ever capital expenditure of ₹6,266 crore during the quarter, largely from our internal accruals. And with 38 mt of capacity, including 32 mt in India, our scale is generating cash flows strong enough to manage our capex cycle.

We have also seen a lot of savings from lower finance costs during the quarter...

We have repaid costly debt across two quarters after getting the funds from the Bhushan deal. Combined with the free cash flow we have generated from our existing operations, it has helped reduce debt, and our weighted average interest rate is now 6.09%, down from 6.16% in the previous quarter, and 6.67% in the September quarter last year. We have also been upgraded by Moody's to investment grade. So these fundamental changes in our balance sheet give us additional comfort apart from scale. In more than 10 years now, we have built a substantial scale in terms of volume, initiatives on raw material security, value-added portfolio, logistics and cost improvement, which has structurally enabled us to be better even during difficult stress times.

When chasing volumes aggressively, do you sometimes have to let go of margins?

Our focus is to create a strong growth pipeline. We want to have control on our raw material assets, while ensuring that the value-added products and special products which India requires are made available. This quarter we approved new projects of ₹29,000 crore, which will add volume, raw material security and value-added products. We are on track, and our focus is on delivering them. From a supply-demand balance, the way I see the growth in India for the next few years, we are quite confident that supply will not be outstripping demand.