Jindal Steel management churn: New CEO calms investor nerves, says he tends to 'stick around'

“I tend to stick around," Malhotra said, responding to an analyst’s question on the management churn during a post-earnings call on Wednesday

In response to a question by Sumangal Nevatia, director at Kotak Securities, on how he planned to address the issue, the CEO stated that many employees have been with the company for over two decades.

“So I see a lot of stickiness. And if I look at the overall retention rates, they are fairly high. And that drives a lot of confidence in me to be able to drive the agendas that we have set for ourselves," he said.

“I think that should give you enough confidence in our journey going forward. And by the way, I tend to stick around," he said.

Revolving doors

Over the last five years, Jindal Steel has seen the departure of five top executives after relatively short stints, including four chief financial officers (CFOs) and former managing director Bimlendra Jha, who left in 2022 after 18 months, a relatively short time for a sector where top executives tend to serve for decades.

Since 2020, the company has had six CFOs, four of whom served for less than a year. Mayank Gupta resigned from the post in July, six months after joining the company.

Gupta and Hemant Kumar Khanna resigned with immediate effect, while two others, Ramkumar Ramaswamy and Deepak Sogani, left with 15 days’ notice.

The high churn of senior executives, including CFOs, creates a negative sentiment among investors, said Suman Kumar, assistant vice-president—metals and mining at brokerage firm Phillip Capital India. “A lot of concern is being raised on this. People understand that there can't be smoke without fire," Kumar said.

Shriram Subramanian, managing director of proxy advisory firm InGovern and an expert on corporate governance said the company must proactively provide more information around the reasons for these departures to avoid speculation and calm investor nerves.

“CFOs, as key management personnel, have to sign off on the company's accounts, making it a crucial role. Frequent and inexplicable exits without logical explanation could be a sign of disagreement," he said.

Jindal Steel did not respond to Mint’s requests for a comment.

New leader, new phase

Malhotra’s appointment ends an over five-year vacancy at the CEO's office. His predecessor Sudhanshu Saraf left the company in April 2020 after a 16-month stint. He continued as a director on the company's board for 20 months after vacating the CEO's post.

This is Malhotra’s first job in a steel company. Prior to his appointment, he founded FuelBuddy, a doorstep fuel delivery company that now operates in five countries.

A computer engineering graduate from the University of Pune, he holds a management degree from Manchester Business School, University of Manchester, with additional specializations in operations and strategy from Indiana University and IIM Ahmedabad.

The new CEO's skills will be closely watched, given that he does not come from a steel industry background, according to Satyadeep Jain, lead analyst for cement, metals, mining and utilities at Ambit Capital. “It is too early to say anything about the new CEO. A perspective can only be formed once the street sees execution and results," Jain said.

Bright prospects

The steelmaker’s September quarter earnings, disclosed on Tuesday, missed expectations. The company reported a net profit attributable to owners of the equity at ₹638 crore for the second quarter, down 26% year-on-year and 58% sequentially, according to its exchange filings.

The profit was below the ₹697 crore average estimate of a Bloomberg poll of 14 analysts.

The company’s revenue from operations also fell 5% over the June quarter to ₹11,686 crore, mainly due to weaker realizations and lower volumes.

Malhotra during the analyst interaction said the performance was impacted due to prolonged monsoon season and plant shutdowns during the quarter.

Jindal Steel has a capacity of 12.6 million tonnes per annum (mtpa) after commissioning a new blast furnace at its flagship plant at Angul in Odisha. The new blast furnace doubled the plant’s hot metal capacity to 8.85 mtpa from 4.25 mtpa. It also began operations of a new 3 mtpa basic oxygen furnace, increasing crude steel capacity at Angul to 9 mtpa.

This makes Jindal Steel India the fourth-largest steelmaker, behind Sajjan Jindal-led JSW Steel, which is the market leader, followed by Tata Steel and the state-owned Steel Authority of India.

Kumar from Phillip Capital said that the company was at an inflection point after significantly paring its debt over the past five years.

“They always used to be stuck at the typical ballpark number of 8 million tonne steel production on an annual basis, but with the Angul expansion coming in, by FY27, operationally there should be a turnaround," he said.

The company's shares were trading 0.5% lower at ₹1,065.70 apiece on the National Stock Exchange on Thursday, in a largely weak market.