Sajjan Jindal Chairman and Managing Director
Dear Shareholders and friends,
I hope that this finds you and your families, safe and well.
The last 15 months have been perhaps the most eventful in living memory. The COVID-19 pandemic has impacted the lives and livelihoods of people across the world in what might be one of the most significant black swan events of our time. However, through these unpredictable times, we have witnessed remarkable scientific progress, multilateral cooperation, government responsiveness, and rapid global transformation — many of which will impact the way we live and interact with each other. Several countries, including India, are now emerging from the throes of a brutal second wave of COVID-19. I am hopeful that the worst is behind us and that better days are ahead.
At JSW Steel, we consider ourselves fortunate to be significantly ahead of the curve in terms of scale and efficiency, a testament to our ability to respond and navigate complexities in a timely fashion. As we regain our operational momentum, I am certain we will be able to reach newer heights.
Upon reflection, I can confidently say that in the past year, JSW Steel delivered on all fronts. We were able to execute our growth strategy in a manner that created exponential value for all stakeholders while consistently delivering on our promises to produce stronger and more sustainable steel.
In order to deliver on our Corporate Social Responsibility promise, we mobilised our resources, both human capital and infrastructure, to help support communities, governments and front-line workers. Our steel complexes despatched over 55,000 MT of liquid medical oxygen from March through May 2021 to hospitals across India. Our cross-functional teams moved swiftly to set up COVID-19 hospitals across Vijayanagar, Dolvi and Jharsuguda with a cumulative capacity of ~1,500 beds. We supported over 2 million patients across more than 500 hospitals. We continue to offer holistic medical support to our employees and their families while honouring our commitment to take care of their entire family, in the event of death from COVID-19 during their time in service.
Managing Environmental, Social, and Governance (ESG) risks is a business imperative and directly affects profitability and shareholder value in the long run. The need for us to consume resources wisely, regulate carbon emissions and manage social and governance factors, is more pressing than ever. At JSW Steel, we recognise this responsibility. To that end, much of our strategic thinking around production and processes, centre around whether we lie within our specified ESG framework.
We are committed to a circular economy and it is with that focus that we strive to consistently optimise our water, waste, carbon and energy footprint. For example, we have resolved to improve net carbon emission intensity well beyond India’s Nationally Determined Contributions as per the Paris Accord commitments, with an aim of achieving more than 41% reduction by 2030 (from the base year of 2005).
"We are placed highly in the world on multiple sustainability parameters, being ranked as a ‘Sustainability Champion’ by WSA for the last three years. Our CDP rating of 'A-' is one of the best in the Global Steel Industry. But this is not enough. We continue to set the bar higher by training our sight on stricter than mandated standards."
To reinforce such commitment, we have a clearly defined sustainability strategy with ambitious yet credible targets set across key sustainability indicators.
During the year, we invested considerably in best-in-class technologies to reduce material consumption, improve coke rate and optimise the use of alternative fuels. The Carbon Capture and Utilisation (CCU) technology at our DRI Plant in Salav recovers CO2 which is then retailed as a value-added product for use in the beverage industry. The 20 MTPA pipe conveyor at Vijayanagar transports iron ore directly from our captive mines, reducing emissions exponentially. The carbon sink created through three million plantations for systematic afforestation is part of our biodiversity-preservation objectives. Further, we are working to procure ~1 GW of renewable energy to power our operations at Vijayanagar, Dolvi and Salem in what will be the largest such project of its kind in India.
However, to achieve our sustainability targets on each front, year after year, the strategic framework and efficiencies need to be communicated and implemented across our entire value chain. To this end, we work closely with our supply chain partners encouraging them to integrate sustainability practices into their everyday operations while engaging with our customers on how to build efficiencies of scale further downstream.
Product sustainability is a part of our commitment to customers, with life-cycle assessment for all finished products underway, allowing us to communicate environmental impact dynamically and transparently. We are also making Environmental Product Declarations (EPDs) for many of our products and working on GreenPro Eco-Labelling of our TMT bars and other construction materials.
We preserve and protect our social license to operate by collaborating with communities and championing many initiatives as part of our CSR programme. These initiatives range from health and nutrition, agriculture, water management to empowering women — all of which are being increasingly delivered through innovative technology platforms. Our efforts have impacted over a million lives spanning over 1,000 villages across 11 states.
"In essence, we are making stronger, responsible and greener steel, a concept unheard of even a decade ago and one that allows us to touch other industries – through tinplate that we supply to the food packaging industry, products for solar structures, and Advanced High-Strength Steel that meets light-weighting and safety requirements of the automotive industry."
Imbibing a ‘zero harm’ culture across operations is fundamental to our thinking. We ensure consistent reductions in our lost time injury frequency rate (LTIFR) and continue to improve health and safety parameters. Our ‘Vision 000’ which focuses on zero major accidents, injury and harm is on track and is being driven by our expert ‘Safety Champions’ across production sites.
Across economies, commodities and specifically steel, FY 2020-21 was a year of two contrasting halves — the first witnessed a massive downturn and the second witnessed an equally resilient upturn and recovery. Governments and central banks worked in tandem to cushion and stabilise this volatility, while policies were designed to facilitate growth.
The story was no different in India. Our Government responded with alacrity in announcing relief measures for the most vulnerable, while supporting SMEs with a series of intelligent measures that focused on capacity building and being future-ready. This was done even as severe restrictions were enforced on human mobility and economic activity during the extended national and state lockdowns.
Consequently, India’s annual GDP performance was better than expected, and the coming years appear promising, even after accounting for the disruptions caused by the second wave of the pandemic.
The global steel industry proved its resilience and witnessed a strong surge of demand in the second half of the year. We believe that the industry is built on robust fundamentals, and, as a result, prices have strengthened significantly from the average of the previous year. Steel continues to hold its position as the most affordable, universally consumed and versatile material that is deployed in solving many of the world’s present-day challenges.
Indian steel producers also witnessed gradually improving utilisation levels and increased exports during the year, underscoring our competitiveness as an industry. Domestic demand also rebounded, with the second half of the year seeing a return of monthly despatches to pre-COVID levels. We expect that increased infrastructure spending, rising demand from automotive and construction, together with a revival of private capex and consumer demand will continue to drive steel consumption.
Despite the prevailing uncertainty, our team rallied to deliver a strong operational performance, a testament to our well-defined strategic framework in place alongside superior execution capabilities.
Commencing production at our iron ore mines in Odisha, enabled a steady stream of quality ore, ensuring production continuity and allowing us to sweat our assets. Our acquisition of iron ore mines through auctions has proved to be a game-changer. The ability to focus on inorganic expansion, saw us make four key acquisitions in the year – Bhushan Power & Steel, Vallabh Tinplate, PCMD Division of Welspun Corp. and Asian Colour Coated. These acquisitions enhance our capacity and stren our downstream capabilities and product mix. We also demonstrated agility by switching rapidly between exports and domestic sales, in line with the shifting demand patterns. Moreover, we set our overseas operations on a turnaround path and expect improved performance from them in FY 2021-22. Lastly, our share of value-added products accounted for 52% of sales, and nearly half of all sales to the retail segment comprised branded products.
Better average realisations, cost optimisation and efficiencies meant that we were able to grow topline by 9%, and saw our operating EBITDA increase to `20,141 crore (a 70% rise from last year’s figure of `11,873 crore), despite higher iron ore and energy prices.
Over the past three years, we have deployed over `48,000 crore of capex to increase our production capacity by 50% (through organic and inorganic routes) without increasing debt. Together with our JVs, and the 5 MTPA expansion at Dolvi that will be commissioned in the next few months, JSW Steel will have ~28 MTPA of steelmaking capacity, including the 1.5 MTPA capacity in USA. These investments, efficiently executed, have given us higher productivity, superior cost profile, and wider portfolio of lucrative value-added products to serve a growing domestic and global market.
We are now embarking on the next phase of growth with the newly approved capex plan of `25,115 crore. This capital will allow us to augment our crude steel capacity at Vijayanagar by 7.5 MTPA, enhance and digitise our mining capabilities and infrastructure in Odisha and help us set up a state-of-the-art colour-coated facility in Jammu & Kashmir – to support local demand and development in the state. In addition, we are focusing on upgrading our acquired facilities through efficiency-enhancing projects. Together, these initiatives will see the combined capacity of JSW Steel, including JVs and associates, expand to ~37.5 MTPA by FY 2024-25.
Our balance sheet is getting stronger as we improve cash flows and efficiently allocate capital. With the new capacities and strong price environment, we expect our net-debt to EBITDA ratio to be ~2.75. We are consistently reducing our cost of capital with access to diverse pools of liquidity and strong relationships with institutions across the world. Our credit ratings from both domestic and international agencies remain strong.
Our efficient capital allocation and industry-leading project execution skills mean that we are able to scale capacity at industry leading capex per tonne, in record time. We have delivered an industry-leading Total Shareholder Return CAGR of 24% over the past 10 years, which validates our efficient capital allocation and execution. The Board has recommended a dividend of `6.5 per share, which is our highest ever, and will lead to a total payout of `1,571 crore.
At JSW Steel, we have always believed in leveraging advanced technologies to maximise efficiencies and service levels. We have recently launched a group-wide digitalisation journey, with 6,000+ employees being engaged in the cultural transformation across 100+ exciting projects. These projects cover a range of Industry 4.0 technologies such as IoT, Artificial Intelligence, Machine Learning, Virtual Modeling & Simulations, all of which are focused on optimising our cost profile, integration across our sites, value-addition of grades, customer satisfaction levels, and safety standards. A few key projects being implemented at the backend include digitalising our advanced planning systems, logistics operations and mining activities. In addition, core support functions such as finance and HR are seeing end-to-end digital transformation. At the front-end, we are creating platform based solutions such as Aikyam to offer institutional customers an integrated experience as part of our JSW One initiative.
Our long-standing collaboration with JFE of Japan has helped us upgrade our product mix, processes and systems. As a result, we now make multiple high value-added steel grades that render superior margins and contribute to a self-reliant India through import substitution. We are now working with JFE on a feasibility study for manufacturing Cold Rolled Grain Oriented (CRGO) Electrical Steel in India, a product that is currently imported in entirety.
I have no doubt that the India growth story will continue to build on its upward trajectory, fueled by a sizeable human capital base, robust domestic consumption and everexpanding manufacturing capabilities.
The government is moving to increase share of manufacturing in GDP to 30% by 2030, and expects India to have a steel capacity of 300 MTPA by then. Global supply chains are witnessing realignment, with a China+1 sourcing approach, as buyers balance cost and stability, benefiting India. The scale, quality and speed at which India is building infrastructure, metros, airports, freight corridors, high-speed trains, and road networks, will further enhance productivity and accelerate growth.
"We are also recalibrating our R&D from a process-oriented approach to a product-oriented approach. As a result, our innovation and research function will increasingly focus on understanding customer requirements and develop a larger variety of specialty grades as well as specialised solutions to meet our customer’s evolving requirements."
JSW Steel’s unrelenting focus on doing ‘Better Everyday’ has resulted not only in our superior financial performance as India’s largest steelmaker, but the ability to deliver on equally important ESG targets, thus increasing shareholder value over time. Our ambitions are supported by a structurally positive outlook for steel demand and pricing, driven by massive infrastructure outlay, controlled expansions in China and a wave of environmental restrictions that are resulting in capacity moderation across the world.
I would like to offer my immense gratitude to our Board, shareholders, bankers and the broader JSW family that has stood by us through an unusually trying time and helped us navigate the recent uncertainty. I would also like to thank external authorities that have put their trust in us and with whom we work closely. Finally, my sincere thanks to the entire JSW Steel team who worked tirelessly to deliver the highest levels of service over this past year, as reflected in our performance, and continue to progress with optimism on what we can achieve
I look forward to your continued support as we embark on this new phase of growth — one that will not only build a stronger future for India but also contribute to a cleaner, greener planet for generations to come.
Sincerely,
