Mumbai: India’s No. 3 steelmaker JSW Steel is actively looking to acquire steel companies in India with capacity for value-added products, as it looks to boost margins and expand its offerings, a top group official said on Monday.

“We are able to create capacity in basic steel making so if there are value-added capacities like galvanizing, colour coating with a standalone company we are looking at it," Rao, who is also JSW Steel’s joint managing director, told Reuters.

“At the same time we have taken steps to increase our own value-added capacity."

Steel demand in Asia’s third-largest economy has been growing at near-double-digits over the past few years, pushing local firms to boost capacity and attracting global steelmakers including ArcelorMittal and Posco to set up base in the country.

India’s rising automobile sales and its growing status as a small-car hub has also boosted demand for value-added steel.

Late last year, JSW had bought a controlling stake in rival Ispat for $476 million, expanding its operations and taking its total steelmaking capacity up to 14.3 million tonnes.

JFE, the world’s fifth-biggest steelmaker, last year bought 14.9% of JSW Steel for $1 billion, and has said it would look to further boost its stake in the company.

“Current agreement with JFE restricts their holding to 14.99%. They are interested in increasing holding, but we have not taken any call yet," Rao said.

Raw Material Woes

JSW currently operates its main Vijaynagar plant in Karnataka at two-thirds capacity due to acute shortage of iron ore after India’s apex court put an interim ban on mining in the state. The company last month cut its production and sales forecast for the current fiscal by 14% and 13%, respectively.

“We don’t have a problem in selling our products. We are suffering from lack of ores," Rao said, adding the revised guidance could be met only if it continued to receive ore through auctions.

Given the lower production, JSW will cut its planned investments in capacity expansion to Rs4,000 core to Rs5,000 crore ($965 million) from the earlier planned 80 billion for this fiscal year ending March, he said. It has planned capex of Rs5,000 crore for the next fiscal year.

The company, which hoped to start construction this year for a new 4.5 million tonne steel plant in West Bengal, expects this project to be delayed by a few months to the next fiscal year, Rao said.

The company is also scouting for coal assets in Australia, Africa, the United States and Canada, given its annual spending of $3 billion to source coal.

Rao denied any interest in a bid for Australian coal miner New Hope Corp, which last month put itself up for sale, and said no specific deal was on the table at present.

Shares in JSW Steel, valued by the market at $2.7 billion, provisionally ended down 7.8% in a weak Mumbai market. The stock has lost nearly half of its value in 2011 so far, compared to a 20% fall in the benchmark stock index.