Billionaire Jindal Family’s JSW Seeks More Distressed Assets

  • Group targets power, steel, iron ore and coal mine deals
  • JSW Steel aims to keep debt at about 400 billion rupees

The billionaire Jindal family’s JSW Group is evaluating further purchases of distressed assets in India while remaining watchful of debt at its flagship steel-making company.

JSW Energy Ltd. is financially very strong and has the firepower for acquisitions, while JSW Steel Ltd. is planning to invest in steel plants as well as iron ore and coking coal mines, group chief financial officer Seshagiri Rao said.

“If we can bring synergies, if we can find value and it’s accretive to shareholders of JSW, then we will find ways and means of doing any attractive opportunity if it comes,” Rao said in an interview in Mumbai. JSW Steel won’t rush into deals and will be careful about leverage, he said.

JSW Group is among investors looking for discounted acquisitions as local companies and lenders sell assets to pare India’s $119 billion mountain of soured debt. The $11 billion conglomerate agreed to buy a Jindal Steel & Power Ltd. power plant this month, completed the purchase of hydroelectric generators from Jaiprakash Associates Ltd. last year and is in talks with Monnet Ispat & Energy Ltd. over a purchase in eastern Odisha state.

“Buying stressed assets right now can stretch their balance sheet in the short term,” said Goutam Chakraborty, an analyst at Emkay Global Financial Services in Mumbai. “But from a longer term business perspective, this is also the time to grow through acquisitions because targets will be available at attractive valuations.”

JSW Steel is the fourth-most-indebted producer in India and like other local mills has been grappling with subdued demand and a flood of cheap imports, mainly from China. The Reserve Bank of India estimates domestic iron and steelmakers owe banks a record 3.1 trillion rupees ($46 billion). 

Rao said JSW Steel will seek to keep debt levels at about 400 billion rupees. That compares with total debt of 351.7 billion rupees as of March 31, according to data compiled by Bloomberg News. The company expects to boost production by 25 percent to 15.75 million tons this fiscal year and is targeting a market share of 15 percent in the near term from 13 percent now, Rao said. 

‘Exceptional’

“Instead of saying today that we will not look at anything because the leverage is at the higher side because of the problems in financial year 2015-16, the way we look at it’s, all opportunities we continue to evaluate,” Rao said. “Whatever has happened in the last year is exceptional, extraordinary and aberrational. That will get corrected soon."

JSW Steel has previously said it’s looking at U.K. steel assets on an exploratory basis. The business has also earmarked 4 billion rupees for the next two years to invest in iron ore and coking coal mines in India, Rao said. 

Southern Karnataka state, where JSW has its 12 million tons a year Vijayanagar plant, will auction 14 iron ore mines in the next two months and JSW will seek to bid for most of those, he said. 

“We would like to bid for whatever is available,” Rao said in the May 18 interview.

The company’s earnings should improve in the year through March 2017 due to higher steel volumes, a better product mix, efforts to restrict costs and curbs on imports by the Indian government, Moody’s Investors Service said in a May 20 note.

JSW Energy has 155 billion rupees debt, is seeking to grow and “can do on its own even further acquisitions” following this month’s power-plant purchase, Rao said. 

JSW Energy had 4.7 billion rupees of cash and equivalents as of March 31, while JSW Steel had 7.34 billion rupees, according to data compiled by Bloomberg News. JSW Energy’s shares closed 0.3 percent lower at 67 rupees in Mumbai, while JSW Steel rose 0.1 percent to 1,320.15 rupees. The S&P BSE Sensex index rose 0.3 percent.

The group as a whole has interests spanning everything from cement to sports and says it employs 40,000 people.

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