According to Mining News Pro -Jindal Stainless Steel Ltd (JSL), the country’s largest stainless steel maker seems to leave behind its debt woes and plans to expand its production capacity by half over the next two years.
India’s dominant stainless steel producer had entered into debt restructuring in 2010 after a tough economic environment hampered loan repayments. It had debts of nearly INR 8,000 crore. However, having repaid most of its dues, the company is now working with banks to exit the program by the end of the fiscal year, nearly two years before the deadline.
Subsequently, after current fiscal, the company plans to increase its production capacity from 1.6 MnT to 2.4 MnT by 2021 amid burgeoning demand from kitchenware, railway, defence and especially automobile sector. This is because the government has asked the companies to move to BS-6 norms which will double the use of stainless steel in each car, from the present average of 15 kg per car to 30 kg.
According to JSL’s top management, the risks to the country`s rosy outlook for stainless steel sector include rising imports. A retreat to protectionism as a result of the trade flare-up between the U.S. and China could see metals, including stainless steel, diverted to India, mainly from countries that have free trade agreements with the south Asian nation.
The Restructuring
As part of the restructuring, JSL`s debt was redistributed among three more firms — Jindal Stainless (Hisar), which is listed and two private companies, Jindal United Steel and Jindal Coke. The move helped in leveraging idle capacity, and bringing down the interest cost by 3.35 percent. At present, JSL has a debt in the range of INR 4,000-5,000 crore.
The turnaround process
As part of turning around the business, JSL set up a railway siding in the Odisha plant, bringing down logistics cost.
To ease operations, the company built a railway siding, which has lowered costs. In another initiative, JSL built 20 warehouses near its customers` facilities just for in-time delivery. The company is also opening up to four more warehouses this year. With the warehouses, the company’s customers are not required to keep inventory and take from us when required.
The company plans to de-bottleneck its facility in Odisha and increase the capacity utilization to 119% from the present 95%.