'It's time to build capacities for growth’
Steel and power have been star performers for a while now. Jindal Steel & Power Ltd (JSPL) has a direct presence in both these businesses. The company is expanding.
By Vivek Sinha, TNN |
| Vikrant Gujral,Vice-Chairman and CEO,JSPL |
Steel and power have been star performers for a while now. Jindal Steel & Power Ltd (JSPL) has a direct presence in both these businesses. The company is expanding. Apart from domestic capacity expansions, it has just signed a deal for mining rights and a steel plant in Bolivia that is worth $2 billion. Vikrant Gujral, vice-chairman and CEO of JSPL, speaks on the steel industry and the road ahead for JSPL.
Almost all steel producers have announced capacity expansions, which would come on steam in the next few years. How does that stack with talks of an impending downturn in the commodity cycle?
Every commodity cycle has its upturn and a downturn. So if it goes down then after sometime the cycle would swing up again. Looking at the demand for steel in the coming years, we feel it is the right time to build capacities for growth. Moreover, a lot of the capacity hike announcements for steel is just on paper. As against some of the steel companies who have just been announcing large projects we are already going ahead with the projects.
As a company JSPL is also looking beyond steel manufacturing and power generation.
We are going to look at all businesses that are related to our core competence. There are a lot of opportunities that we are either evaluating or already in the process of implementing. For instance, we have now started some exploratory operations for diamond mining in both India and Africa. This could be later extended to gold mining as well. We are also eyeing coal mines in other countries such as Australia and Indonesia which can be utilised for two purposes. One could be for pure coal trading and secondly we would like to build a captive supply base for our steel business as well as for our power generation business. At the same time, we would also like to get into power trading. Power trading business could become big going forward as we get into super-mega power projects.
Recently you have also taken board approval to get into aviation business....
It’s not exactly entering aviation as a business. What we are looking at as of now is chartered air services. We have a small fleet which we have been using for the company as well as leasing out. We felt that we can better utilise the company’s asset by offering short chartered air services. With the kind of business activity level we are seeing in the country today, there are many people moving within India and there are also people who come from outside and do not want to stay long — may be, attend a meeting and then move out within one day.
As a group, the Jindal brothers have steered clear of each other’s business and within steel each company has been focusing on separate categories. But now increasingly they are getting into each other’s business specially JSPL and JSW Steel....
There will be competition. There have been some product overlaps between JSW and us and at Angul in Orissa we would be making products which they are making. Having said that, there are lots of regional advantages for both of us depending on where we are producing and where we are setting up our plant. For instance, from Angul we can export to the rest of Asia as it would be close to the eastern ports. This apart, it can also cater to regional domestic demand for flat steel products.
The profit margins in the power business have not been growing much and most of the profit growth is coming from steel.
While the margins in the power business are higher than steel, there we are bound by long-term power purchase agreements so price revisions as in the case of steel is not possible. Going forward we would be adding more power generation capacities that would bring growth in the power business. And as our new units start producing, the steel business is also going to contribute.
Any large project takes some time to fructify. Moreover, the size of the project itself is huge and would have a big impact on the economy of Bolivia. The project would take off once we get the final approval from the government. The process is similar to that in India, with issues such as environmental clearances.
Almost all steel producers have announced capacity expansions, which would come on steam in the next few years. How does that stack with talks of an impending downturn in the commodity cycle?
Every commodity cycle has its upturn and a downturn. So if it goes down then after sometime the cycle would swing up again. Looking at the demand for steel in the coming years, we feel it is the right time to build capacities for growth. Moreover, a lot of the capacity hike announcements for steel is just on paper. As against some of the steel companies who have just been announcing large projects we are already going ahead with the projects.
As a company JSPL is also looking beyond steel manufacturing and power generation.
We are going to look at all businesses that are related to our core competence. There are a lot of opportunities that we are either evaluating or already in the process of implementing. For instance, we have now started some exploratory operations for diamond mining in both India and Africa. This could be later extended to gold mining as well. We are also eyeing coal mines in other countries such as Australia and Indonesia which can be utilised for two purposes. One could be for pure coal trading and secondly we would like to build a captive supply base for our steel business as well as for our power generation business. At the same time, we would also like to get into power trading. Power trading business could become big going forward as we get into super-mega power projects.
Recently you have also taken board approval to get into aviation business....
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It’s not exactly entering aviation as a business. What we are looking at as of now is chartered air services. We have a small fleet which we have been using for the company as well as leasing out. We felt that we can better utilise the company’s asset by offering short chartered air services. With the kind of business activity level we are seeing in the country today, there are many people moving within India and there are also people who come from outside and do not want to stay long — may be, attend a meeting and then move out within one day.
As a group, the Jindal brothers have steered clear of each other’s business and within steel each company has been focusing on separate categories. But now increasingly they are getting into each other’s business specially JSPL and JSW Steel....
There will be competition. There have been some product overlaps between JSW and us and at Angul in Orissa we would be making products which they are making. Having said that, there are lots of regional advantages for both of us depending on where we are producing and where we are setting up our plant. For instance, from Angul we can export to the rest of Asia as it would be close to the eastern ports. This apart, it can also cater to regional domestic demand for flat steel products.
The profit margins in the power business have not been growing much and most of the profit growth is coming from steel.
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Doesn’t that leave the company more prone to the steel cycle?While the margins in the power business are higher than steel, there we are bound by long-term power purchase agreements so price revisions as in the case of steel is not possible. Going forward we would be adding more power generation capacities that would bring growth in the power business. And as our new units start producing, the steel business is also going to contribute.
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The Bolivian deal was finally signed more than a year after you won the bid. Why did it take so long to sort things out?Any large project takes some time to fructify. Moreover, the size of the project itself is huge and would have a big impact on the economy of Bolivia. The project would take off once we get the final approval from the government. The process is similar to that in India, with issues such as environmental clearances.
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