India’s largest steelmaker JSW Steel reported a lower than expected profit in Q2 on the back of the weak price of the alloy. Jayant Acharya, joint managing director & CEO of the company, explains to Sambit Saha of The Telegraph that the second half would be better and JSW’s growth story remains intact. An edited excerpt:

The second quarter profits came below expectation. Is the fall in net sales realisation (NSR) the culprit this time?

Yes. The prices were the main culprit. NSR went down more than ₹3,000 a tonne which impacted us on the EBITDA side. However, EBITDA from Indian operations actually improved over Q1FY25 in spite of these challenges because we made up for the NSR drop through cost management.

I think on the volume side, India operations were strong, our production, domestic sales were our highest and our institutional sales were higher. So those were the positives. Exports went down because of the weak international scenario and we also had a negative impact from the international operation.

If we look at PAT, it was quite a swing on a y-o-y basis.

There was an exceptional gain of ₹589 crore in Q2FY24 compared with a loss of ₹342 crore in Q2FY25 on account of the Odisha mine surrender. It is almost a swing of ₹1,000 crore EBITDA was lower as prices have fallen substantially from the last year to this year.

HRC prices were ₹60,000 a tonne on April 23, which came down to ₹52,000 a tonne on April 24. It dropped further in September to 48 levels. I think July, August and September have seen the main brunt of pricing. Exports were also down 0.3 million tonnes (mt).

How do you expect the Q3 and H2 to play out?

The prices have improved $40-50 a tonne after the Chinese stimulus. We have also increased prices in October. We are now seeing slightly better sentiments because export from China is going to reduce. JSW’s cost is also going to improve further as coking coal cost will come down by $20-25 a tonne.

Our four iron ore mines will come in, further increasing our captive source and reducing the cost of iron ore in H2. Volume will increase from the new capacities and so is the absolute EBITDA generation.

But NMDC has hiked iron ore prices.

We don’t think that that is sustainable. Internationally prices have moderated a little below $100 a tonne, so I’m expecting that there will be some correction in the iron or prices in the domestic market too.

How do you expect the steel demand to play out given many high frequency indicators of the economy pointing towards deceleration?

The H1 was very encouraging. There was a 13.5 per cent growth to almost 73mt from 64 mt in the year before despite elections and waves of monsoons that hurt consumption. India’s growth in H2FY24 was 73mt, which has been achieved in H1FY25 itself. H2 is usually better. I think we will probably be in the range of 150mt of demand in FY25, which means an increment of 14-15 MT.

This is happening because of the infrastructure creation by the government. And now the private capital is starting to pull in a lot of demand. Energy transition will be a key driver. And we will see some improvement in automotive, appliances and consumption as we go along.

But there is an apprehension about government capex slowing down. What do you see on the ground?

Just 40 per cent of the ₹11.1 lakh crores capex was spent in H1. So, the balance 60 per cent is still to be spent. The government directionally has given indication that they would like to spend it and GoI has the fiscal space to do so, backed by strong GST and tax collections.

If I look at JSW over the years, it is always on a growth path. But, given that where the debt is, and debt to EBITDA ratio outside your comfort zone of 2 to 2.5, is there a need to recalibrate the pace of growth?

I don’t think so and I will tell you why. Because now the capital work in progress, which was in our debt for JVML (5mt expansion in Karnataka) and in BPSL, is getting unlocked; they will become productive. This is going to play out partly in H2 and fully in FY26.

So, cash flow from this incremental 6mt will come in. In addition, we will get another 2mt in the second half of FY26 from debottlenecking. So, this 8 MT of capex unlocking will drive our expansions for the next phase of Dolvi (5mt expansion) and then once that (Dolvi) capacity kicks in, it will drive the next phase.

And if I go back in history, we were just under 5mt in 2008. We faced many challenges on the way, the crisis in 2008, in 2015-16 and then Covid. But we still completed everything, so I think JSW Steel has been very resilient. Also, we are not only doing not only scaling, but content improvement. So, we remain very optimistic going forward.

But can you give us any guidance where the debt level will be by the end of FY25?

Directionally, we will improve the ratios. Absolute EBITDA will go up from volume spread. It will be difficult to put a number. But our focus is to lower this ratio and also absolute debt (₹85,098 crore).

JSW just announced acquisition of Thyssenkrupp (TK) facility in Nashik. What is the plan going forward?

The CRGO (cold rolled grain oriented) steel goes into transformers and generators. This is a high technology product which is available to a few. So, JSW will be one of the few companies in the world to have the technology.

What is the potential in Nashik?

TK facility will allow us instant access to the market, the substrate which was coming from Germany will now be produced here. Therefore, we will be much better from a cost and margin point of view. The demand in India is at about 300,000 tonnes and growing very well. Currently, two-third of it is imported. Production capacity at Nashik is 50,000 tonne. But the facility provides scalability. We’ll be able to increase 20 per cent capacity with very little incremental investment, and we can scale up beyond that, may be up to 200,000 tonne in two years.

But the greenfield project with JFE in Vijaynagar is going ahead?

Of course, it will be a 60,000-tonne capacity by 2027. We are going to make CRGO right from iron ore to steel-making. The JV at Vijaynagar will also have something called domain refining which will be very high-end grade of CRGO.