00:00First off, we've been talking about the rupee and the weakness in the currency.
00:03How are you assessing, you know, the spiraling down of the currency?
00:10Yes, so the foreign exchange impact, the depreciation of the rupee in the last year has been quite steep.
00:15We almost had a 10 to 11 percent depreciation and that has caused an increase in cost and
00:23increase in an overall debt levels, etc., which is there for foreign borrowing.
00:29Having said that, I think we are taking steps to see that we are protected more from a hedging
00:35point of view and our loans are balanced between the foreign component and the domestic debt.
00:43We've just talked about how the government is taking emergency measures.
00:47Do you think more needs to be done?
00:48What would you like to see?
00:51If I just take a step back, Haslinda, I think the Indian economy, you know, in spite of the
00:57challenges, the external challenges which is being faced, is doing quite well.
01:02The IMF, in its recent forecast, has also said that the global economy is resilient at 3.1 percent
01:09growth expected for this calendar year.
01:11Should the war be prolonged, I think there could be an impact undoubtedly.
01:15But as of now, we see that the Indian economy is also doing quite well.
01:21Structurally, we see that the demand from a consumption point of view in India would remain strong.
01:28And that would help manufacturing, infrastructure, energy security as we go into our next phase of growth.
01:38In terms of the demand, you talked about how you expect it to be strong.
01:42How strong would that be?
01:43Because we know 90 percent of your sales is actually in India.
01:47Yes.
01:48So if you look at a steel demand point of view, incrementally, we added about 12 million tons last year.
01:56We reached 164 million tons of steel demand last year.
02:00The rate of growth, we expect between 7 to 9 percent growing forward.
02:05So incrementally, we would add about 12 to 15 million tons of steel every year.
02:10And for that, we would need to create capacity in the remaining years of about 120 to 130 million tons
02:18by the end of the next six to seven years to be able to meet that demand in the domestic
02:23market.
02:24Are you factoring in, I guess, the complications and the challenges from the Iran war?
02:32We are conscious of the fact that the costs of energy have gone up and the challenges of the supply
02:40chain
02:40have become more, I would say, prolonged.
02:46However, if I look back and see the kind of crises we have gone through over the last six years,
02:53the pandemic and the various wars, the steel demand in India has grown from 100 million tons
02:58just pre-COVID to now 164 million tons.
03:01So irrespective of the bumps which we have faced on the road, in the journey,
03:06I think things have evened out.
03:09So we are conscious of the current challenges,
03:12but we are not letting that be the only driver for our decision-making for the future.
03:17We do feel that the economic fundamentals are strong
03:21and the growth for the next decade or two would be strong.
03:25Any steel plant takes about four to five years to build,
03:27and I think you need to take a call in advance so that you are having the capacities in place
03:33when the demand comes in.
03:35I would imagine, Jayan, that cost, input costs in particular, are higher.
03:40Coking coal, fuel costs.
03:42Give us a sense of how much higher your costs are right now
03:46and how is that impacting your margins?
03:50Yeah, so in this quarter, we do expect a cost increase of, in the range of about $30 or so,
03:58which would be impacted by increase in cooking coal costs, increase in some iron ore costs,
04:04as well as the depreciation of the foreign exchange.
04:09However, on the plus side is that whatever the price increases which have happened internationally
04:14have also reflected in India,
04:15and we would be able to offset the cost
04:20and incrementally add to the spread in this quarter, is our expectation.
04:26And also looking at steel prices in India,
04:30they've recovered somewhat because of the safeguard taxes.
04:33I'm just wondering if, you know, you see stability in the prices.
04:38What's your own projection?
04:39What's the forecast there?
04:41Yeah, so, yes, we do.
04:44At prices, we do see to be range-bound as of now.
04:47If you really look at the prices in the Asian side,
04:52typically they are in the range of $550 to $600.
04:55India is in the range of $600 or so per ton,
04:58whereas what you see in Europe is about $800 plus,
05:00and the United States is about $1,100 plus.
05:03I think in India, the pricing is very balanced.
05:08Given the volatility in the external environment,
05:11I would say the prices would be range-bound for now,
05:16and, you know, we would be stable probably for a few months
05:21as we go into a seasonally monsoon quarter.
05:24But having said that, I would also like to mention that the steel prices have moved up
05:30from historical lows in the October-December quarter, which was a six-year low.
05:34So, the price corrections which have taken place are bringing it back
05:38to a balanced, sustainable level only.
05:42And, Jayan, I'm looking at your capital expenditure plan.
05:47You raised it by 50% year-on-year to $2.5 billion this fiscal year.
05:52Give us a sense of how you'll be deploying your capital.
05:57So, we are expanding our capacities as we go into the next decade.
06:03Our current capacities, including our joint ventures in India,
06:07is about close to 38 million tons.
06:09We would be expanding between now to 2032
06:13to 62 million tons from JSW Steel alone,
06:18and including our recently signed joint ventures with JFE and POSCO
06:23that can incrementally add about 16 million tons
06:25to go to 78 million tons in India.
06:29This capacity expansion would happen over a period of seven years,
06:33and that's how we are spending in the range of about $2.5 billion,
06:37$2 to $2.5 billion every year to expand this capacity.
06:44It is a big expansion plan.
06:45I'm just wondering if you need new funding for it.
06:50We don't expect we would require much funding
06:53because the generation of the internal accruals
06:57would be more or less sufficient.
07:00You will borrow incrementally to maybe replace
07:03some of the more expensive debts,
07:05but most of the growth will come from internal accruals.
07:10Jen, you talked earlier about your joint venture with POSCO.
07:15Could you give us an update on that?
07:16What's the status?
07:19So, we have concluded the joint venture agreement
07:22agreement for a greenfield steel plant in Orissa, along with POSCO.
07:28The steel plant would be for a capacity of about 6 million tons.
07:32POSCO has a downstream facility of about 2 million tons in Maharashtra,
07:37for which they wanted to backward integrate for a steelmaking facility.
07:42And that's how we got into a joint venture to set up that facility.
07:47POSCO brings in good technology.
07:50They're one of the leading global steel players.
07:54JSW brings in the low specific investment cost of investment, low OPEX, and the speed of execution.
08:02So, both together, I think we'll be able to bring value to this project.
08:07Are you looking possibly at new joint ventures or even acquisitions of mining assets as you look for expansion?
08:18Yes, we did conclude a cooking coal asset in Mozambique just recently.
08:25That's for high-grade cooking coal, which would be required for the steelmaking operations.
08:30That has a reserve to be able to give us 250 million tons of prime, low-volatile cooking coal that
08:37would go into our operations as we expand.
08:39We are looking selectively at high-grade cooking coal internationally.
08:44As far as steel operations are concerned, we would like to look within India.
08:48And if there are any opportunities which make strategic sense, we'll look at that.
08:52Are you actually in conversations right now?
08:57Not as of now.
09:00Jayan, these are pretty challenging times for companies.
09:03I mean, you seem pretty optimistic about the outlook for JSW Steel.
09:07What are some of the risks you see as the company looks to grow?
09:14So, the geopolitical risk is one of them.
09:17The energy impact, the energy security is a risk coming out of that.
09:24I think India would, as a country, would need to secure energy within.
09:30We are fortunate to be able to add solar and renewable energy, wind, hydro, et cetera, at a fast pace
09:38in India.
09:39And efforts will have to be made to become more energy self-reliant as we grow our economic path over
09:48the next two decades or so.
09:50So, important for every manufacturing organization is also to create an industrial ecosystem in India and reduce the reliance of
09:59external supply chains to the extent possible.
10:01The government has taken a lot of measures to give structural reforms to the country to enable that to happen.
10:08And I think everybody is taking steps to improve the self-reliance of supply chains as we develop our economy.
10:16And what might derail India's growth?
10:20So, the risks, as I said, one is the medium-term energy security, and that's something which we need to
10:27look at.
10:27We need to develop the supply chains which are coming right now, any kind of critical components which are coming
10:32from international markets.
10:34The other one which we need to look at and introspect and see what we can do about is the
10:40depreciation of the rupee as we build our economy.
10:44Jayan, thank you so much for your time. Jayan Acharya joined MDN CEO at JSW Steel.
10:49Thank you so much for your time.
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