JSW plans Rs 17000 cr expansion

NEW DELHI: Steel maker JSW will invest more than Rs 17,000 crore to increase production capacity to 10 million tonnes (MT) by 2010, and is considering a secondary listing on overseas bourses.

“The firm will invest Rs 17,718 crore (about $4.5 billion) to ramp up production capacity to 10 MT from the current 3.2 MT. Of the total money, we will invest Rs 3,937 crore (about $1 billion) this fiscal,” JSW Group director, finance, Seshagiri Rao said.

Of the total money, the company has already raised about Rs 2,000 crore  ($500 million) till April and the balance would be raised through cash accruals. The company plans to increase production to 30 MT by 2020, but blueprint for the same is yet to be finalised.

Rao said the outlook for steel looked bright with the construction sector doing well. Besides sales of other steel products were also picking up.

“I have reasons to believe that steel prices would not go down as the sector is doing well,” Rao said.

JSW is also considering a secondary listing on an overseas stock exchange, either in Singapore, New York or London, to fund its expansion plans.

The plan would fit in with the efforts to expand outside India through possible acquisitions in Europe for about $500 million, JSW vice-chairman and managing director Sajjan Jindal said.

Jindal said while most of the company’s production would continue to focus on India, he saw benefits of listing about 10% of the company’s shares on an overseas stock exchange “in about two years time”.

The proposal to go for a secondary listing was based on the projection that JSW’s stock market value would rise during the next two years as it increases output on the back of boosted profits.

“Assuming the plan for a secondary listing proceeds, the Jindal family would keep its stake at about 50% by buying existing shares on the Bombay Stock Exchange before the float and then issuing new shares via the selected foreign exchange,” it  said.

JSW reported earnings before interest, depreciation, taxation and amortisation (EBIDTA) of $750 million on sales of $2.7 billion last year, and, this year, it is expected to report EBIDTA of about $1 billion on sales of about $3.5 billion.