JSW Steel and JFE, Japan, have reached an agreement whereby JFE will buy 14.9% stake in the Indian company at a minimum price of Rs5,700 crore.
The proceeds of JFE investment will go majorly into debt reduction and a part of it will go for working capital and capex. Total consolidated debt on JSW’s books as on June 30 was Rs17,700 crore and debt-equity ratio stood at 1.71:1.
Sajjan Jindal, vice-chairman and managing director, JSW Steel, said the company is planning to add 2 million tonne cold rolling mill (CRM) capacity at its Vijayanagar plant at a cost of $500-700 million in next 2-3 years. This will take the total CRM capacity of the company to 3 mt.
JFE would provide technology to JSW for manufacturing slabs and HR coils used in the production of automobile sheet products at the latter’s upcoming CRM facility.
Interestingly, in November when JSW and JFE had announced the technological collaboration, both the companies had focused on the proposed 10 mt West Bengal steel plant.
The plant is currently on the drawing board and the technology provided by JFE will be now used to manufacture auto-grade steel in the flagship Vijayanagar plant.
On the West Bengal plant, Jindal said, “When we began the discussions with JFE, the idea was for the West Bengal project. However, as we went into the discussions, both the companies felt that it is a good idea to invest in the parent company.” Jindal said that talks for West Bengal plant are still open and will be taken forward once the investment transactions are over.
Jindal said the first phase of the West Bengal project, which includes 3 mt steel plant and a 300 mw power plant, will take 3 years. “The designing of the steel plant is underway and we expect to start with the construction of the boundary wall before the end of the current fiscal.” The company hasn’t achieved the financial closure for the plant yet. JSW Steel's net profit for the quarter ended June 30 rose 26% to 295 crore from Rs234 crore a year earlier. Sales climbed 21% to Rs4,820 crore.