JSW Steel delays WB project on credit crunch

JSW Steel delays WB project on credit crunch

Mumbai: “JSW Steel Ltd has delayed its project in West Bengal (WB) due to unavailability of funds, but will finalise loan tie-ups for it in two months," a senior official said.

“The Bengal project will take some time. In this market, I don’t want to launch any loan syndication," MVS Seshagiri Rao, director of finance, JSW Steel Ltd said.

The firm, which was planning to lay the foundation for the project in November, will set up a 6 million tonne steel plant in phases and a 300 megawatt captive power plant through its Bengal unit.

“Recently, it cut the project cost to Rs40 billion from Rs350 billion announced earlier," Rao said.

“Establishing raw material linkages is a problem as India is deficient in coal. While iron ore prices have come off their peak, coal (price) is still high. Before raising capacity, we first need to secure raw material," he added.

Rao was concerned about a demand slowdown, which could be overcome if the liquidity crisis in India was resolved.


“With the firm’s topline likely to be hit due to easing finished steel prices and margins continuing to be under pressure, JSW Steel has resorted to cost-cutting," Rao said.

“Cost pressure is tremendous. So, we are focussing on areas where you can control costs," he added.

The impact of a recent deal to buy iron ore and coking coal at nearly double and triple rates and softening steel prices is likely to affect the company’s earnings.

A Reuters poll of brokerages showed JSW will show another drop in quarterly profits to Rs4.66 billion on an 80% rise in net sale of Rs45.37 billion.

Its operating margin is seen falling by 10.4% points in the quarter.

In a bid to control costs, the firm is working at cutting its administration overheads and raising captive power through its units in Karnataka, Maharashtra and Rajasthan.

“We will save Rs40 crore per annum once we go 100% captive in Maharashtra by December 2008," Rao said.

Shares in the firm ended 5.53% lower at Rs263.95 in a weak Mumbai market.