Interview with Abhyuday Jindal, MD of Jindal Stainless

Interview with Abhyuday Jindal, MD of Jindal Stainless

Jindal Stainless is making the news, for all the right reasons! It recently expanded from 1.9 million tonne per annum (mtpa) to 2.9 mtpa, a capacity expansion that propels it to be among the top five stainless steel manufacturers in the world, excluding China. This expansion project – primarily br...

Jindal Stainless is making the news, for all the right reasons! It recently expanded from 1.9 million tonne per annum (mtpa) to 2.9 mtpa, a capacity expansion that propels it to be among the top five stainless steel manufacturers in the world, excluding China. This expansion project – primarily brownfield in nature – required an estimated capital expenditure of around Rs 2,600 crore with the company already having invested in infrastructure and basic technology. Abhyuday Jindal, Managing Director, shares more with Jayashree Kurup, Senior Editor, on the company’s plans and prospects, and the industry….Tell us about the timing of your significant capex investment and near doubling of capacity.The timing of our expansion was opportune, considering the strong demand for stainless steel, both domestically and internationally. We have also been in a sound financial position, with our net debt/EBITDA for FY23 at 0.7, one of the best as per industry standards. Currently, our melting capacity in Hisar and Jajpur stand at 0.8 mtpa and 2.1 mtpa, respectively. However, the capacity at Jajpur can be further scaled up owing to the land bank; up to 3.2 mtpa with minimal additional investment. We will focus on stabilising the current expansion for the next couple of years.You have also announced the acquisition of mines for nickel. Is this in line with the increased capacity?We have entered a JV with New Yaking Pte Ltd, wherein we have acquired a 49 per cent stake in the newly formed entity. It involves an investment of about $ 157 million for the construction and operation of a nickel pig iron smelter facility in Indonesia. This acquisition will secure nickel-based raw material for our future, providing us with a competitive edge over other players in the market.Has the steel scrap recycling policy helped streamline the acquisition of scrap as an input?The Government of India issued the Steel Scrap Recycling Policy in 2019 to create a scientific method of collecting, dismantling and processing products that could be used for recycling. The policy includes guidelines for manufacturers and the Government to set up a responsive environment with a focus on energy saving. The policy aims to strengthen the unorganised scrap market by becoming more structured. This has not only helped in increasing the availability of scrap in the market but improving its quality. However, the demand for scrap in the domestic market is much higher than the scrap made available by the policy.How has the consolidation of the Hisar and Orissa units helped?The merger has unified the strengths of both entities, such as the Jajpur plant’s port and raw material proximity and the Hisar plant’s strategic location in key domestic consumption centres, besides integrating state-of-the-art technology. The reinvestment opportunity at Jajpur for cost-effective brownfield expansion forms part of the consolidated synergies.On the operations front, the merger has resulted in improved efficiencies and logistics due to elimination of duplication arising from warehousing requirements. Customers now get the best of both worlds as the merger offers 360° product diversification. They have a one-stop shop with seamless integration of high volumes and niche offerings. The company also has a single window for sales and after-sales service now, enhancing the customer experience. The merger further strengthens Jindal Stainless’s pan-India network, and ‘Just-in-Time’ approach. On the financial front, it offers a stronger balance sheet and leverage ratios.Which industries have contributed to the significant rise in demand for stainless steel?Owing to stainless steel’s unique characteristics, such as corrosion resistance, lower lifecycle cost, 100 per cent recyclability and sustainability, it has witnessed a significant growth in its application across diverse industries. From traditional segments like architecture, building and construction (ABC), automobile, railways and transport (ART) to the process industry and consumer durables, there is an increased usage of stainless steel in emerging sectors such as defence, aerospace, renewable energy, and the green and blue economy. As India is a growing economy, all these segments boast healthy CAGRs.As a business, we have decided to diversify our offerings for revenue generation and maintaining a balanced growth rate. Our production lines have also been made flexible enough to switch between different grades of stainless steel to cater to a dynamic market situation. As a market leader, Jindal Stainless considers it a responsibility to educate and bring awareness to society about adopting stainless steel. Hence, whether it is a nationwide training of fabricators at a grassroots level under the aegis of the Stainless Academy or running special stainless steel courses at major engineering and architectural colleges, we continue to canvass for the use of stainless steel. Our MoU with the Confederation of Indian Industry (CII) aims to improve the life expectancy and safety of public infrastructure by fighting against the menace of corrosion, which can be achieved by incorporating stainless steel in our lives.How has the Make in India initiative helped push demand for stainless steel?The Government’s focus on strategic segments, such as infrastructure and railways, has helped push demand in the overall metals industry and Indian companies have certainly gained in the process. However, this demand has not been fully capitalised by Indian producers due to the influx of non-WTO-compliant subsidised Chinese imports. So while there is a focus on Make in India, lack of a level-playing field has led to huge dumped imports from China. As a result, MSMEs, which form 40-45 per cent of the stainless steel sector, have suffered immensely, with several turning from manufacturers to traders. Moreover, the MSMEs are operating at an overall capacity utilisation of 60 per cent at a time when one-third of the Indian consumption of stainless steel is being met by imports. We appreciate that the Government has earmarked 75 per cent of its defence procurement budget for the domestic industry in 2023-24. We are now awaiting a similar announcement in other industries, such as architecture, building, construction, automobiles, railways and transport.How did the imposition of export tax impact you and what impact has its reversal had?The imposition of export duty last year severely affected our export volumes. The numbers plummeted from 25 per cent in Q1FY23 to a mere 5 per cent in Q2FY23. This disruption in the global trade market also prompted our export customers to seek alternative channels. The implications of such knee-jerk policy changes often cause long-term disruption to supply chains. Moreover, due to the global slowdown, the beginning of the year witnessed a huge amount of destocking and inventory pileup. Consequently, our exports were unable to resume to previous levels. However, in this fiscal, we are improving and gradually returning to normalcy. We hope that our export share touches the initial figures of pre-export duty by the end of FY24.You are also open to the acquisitions route to grow. What makes you ‘a company in a hurry’?We are always open to opportunities where we see long-term potential growth. Strategic acquisitions help us further diversify our offerings and meet our growing raw material needs as we grow bigger. We have been around for over 50 years now so I will not say we are a company in a hurry. We believe in competitive manufacturing strengths and maintaining long-term customer relations. We have agility in our manufacturing systems and only when we see sustainable growth in a particular segment or geography do we commit ourselves. For us, a commitment is for the long term.How significant is the auto industry’s growth in your scheme of things? How has the electric vehicles sector growth fuelled it further?As mentioned earlier, our growth strategy is to cater to a diversified group of sectors. The auto and transport industry is a core customer segment we believe has immense potential for our growth. For Indian markets, the trends show that the future of the automobile sector is hybrid, not purely electric. As stainless steel is used in the exhaust fans and disc brakes of vehicles, the electric vehicles sector will further boost stainless steel usage. According to the Society of Indian Automobile Manufacturers (SIAM), overall automobile domestic sales in 2022-23 were up by 20 per cent and the industry recorded highest passenger vehicle sales with an annual growth of 27 per cent. Overall stainless steel demand in the automobile sector is also projected to grow at a healthy CAGR.You have started focusing on domestic markets as well. How have the Government’s capex investment announcements worked for you?While the export market is our strategy, the domestic market has been and remains central to our operations. The company was founded on the ethos to increase the consumption of domestic stainless steel in India as well as to realise import substitution. Over five decades, we have seen a sea-change in the scenario from the times when there was 100 per cent import dependence in our sector. While domestic markets remain our mainstay, we will continue to partake in exports to keep up with the technology, products and offerings in a highly competitive atmosphere.We believe the Government’s capex announcement will bring around a virtuous investment cycle in all businesses, which will also help us. Therefore, projects under the Government’s budget in infrastructure, railways, urban sewage systems and renewed focus on vehicle scrapping, among others, will be the growth drivers for the next five years. The PLI 2.0 by the Government could go a long way in helping the metals industry in harnessing its true export potential.What are the infrastructure fixes that you would look forward to from the Government in roads, railways, ports, inland waterways and coastal shipping?We need the Government’s intervention in improving logistics via roads, railways and waterways. In India, the competitiveness of several industries, including manufacturing, is hindered by inefficiencies such as high costs of capital and logistics. Just the cost of logistics in India is 13 per cent compared to 8 per cent globally, as per reports. However, India is still able to compete in terms of both quality and cost because of its world-class manufacturing capabilities. Stainless steel will most definitely be a major contributor to improve these logistical issues by strengthening its infrastructure and making the country more competitive globally.What are your green energy timelines?We aim to achieve net-zero carbon emission by 2050. We have already reduced about 2.4 lakh tonne of CO2 in the past two fiscals. Our midterm goal is to achieve at least 50 per cent reduction of emissions by 2035 from the baseline year 2021-22. We are also the first Indian stainless steel company to set up a green hydrogen plant. It is scheduled to be commissioned by August 2023. We have also partnered with ReNew Power to set up a 100-mw hybrid RE round-the-clock (RTC) project. This project will be commissioned by May 2024.We are determined to reduce our overall carbon footprint by shifting to renewable energy from a thermal energy setup, forging strategic partnerships and introducing floating and solar power plants to generate green energy, among other things. As a business conscious of its own carbon footprint, we conducted a plastic waste collection drive among our employees in June that led to a collection of more than 2 tonne of plastic waste.

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