NEW DELHI: Jindal Steel & Power Limited (JSPL) plans to eschew borrowings in the coming years, preferring to rely on sweating its assets to generate cash flows and strategic divestment to keep its balance sheet strong, according to Naveen Jindal, chairman of the Delhi-based company.
“We are going to be very conservative taking loans. Whatever our EBITDA (earnings before interest, tax, depreciation and amortization) is, standalone or consolidated, we will not want it to be more than double of that at any point of time," Jindal told Mint on phone. The company closed financial year 2020 (April-March) with a consolidated EBITDA of ₹8,406 crore.
Jindal said the company plans to continue with its debt-reduction strategy in 2020-21 as well, making it the fourth consecutive year the power and steel maker would have done this. The company’s current debt at a consolidated level stands at ₹34,000 crore, down 28% from its peak level of ₹47,000 in 2016-17, Jindal said.
“At a consolidated level, we want to bring it down to ₹25,000 in two years. We would be comfortable with that figure. That’s sustainable. We are done with our capex cycle. It’s time to sweat the assets," the 50-year-old former member of the Lok Sabha said.
The company’s consolidated debt of ₹34,000 crore is broadly spread across three segments with half of it resting in the Indian steel business of 8.6 mtpa capacity. Around a quarter of the total debt is in 2.4 mtpa steel capacity at Oman and 6.6 mtpa coal mining operations in Australia, Mozambique and the rest in 3,400 MW power generation capacity that lies under Jindal Power Ltd (JPL). JSPL owns 96.43% stake in JPL.
Jindal said efforts to cut debt would be made not just at the company level but also at the level of the promoter. Jindal and his family, elder brother Sajjan Jindal of the JSW Group, and their relatives own 60.4% stake, directly or indirectly, in the listed JSPL.
The promoters have made headway on that front too, having cut their debt by 70% to ₹355 crore from ₹1,151 crore two years back. The promoters paid ₹350 crore earlier this month that helped release 10 crore shares of the company they had pledged. This quantum comprises almost 10% of the company’s 1.02-billion-share equity base. The promoters have as many shares of the company still pledged with the lenders and Jindal expects to get them released as well in another 18 months.
“At the promoter level, we will reduce the debt to zero in one-and-a-half years," he said.
One asset that Jindal said JSPL will look to monetize is its operations in Oman. JSPL has a fully-owned holding company, Jindal Steel & Power (Mauritius) Ltd, for its overseas business. The Mauritian arm fully owns Jindal Shadeed Iron & Steel Ltd, JSPL’s Oman unit which operates its 2.4 mtpa steel plant.
For a long time, JSPL explored the option of an initial public offering (IPO) to encash part of its Oman operations. But the company has now dropped the IPO plan and may now go for stake sale to a strategic player.
“Markets are not very developed in that region (West Asia). Hence, we have shelved the idea for an IPO. We will look at a strategic divestment," Jindal said.
As the group prepares to sweat its steel assets, things are looking up for it in the power sector as well. Two months back, JSPL’s power subsidiary JPL won a bid to supply 420 MW to PTC India Ltd at a price of ₹3.26 per unit. Many of JPL competitors also got the mandate to supply power for various capacities at the same price, the lowest in many years.
The success for JPL came after several years of losing ground to green energy sources like wind and solar power. Jindal said the supply of power from its plants at Tamnar in Chhattisgarh would start from next month.