Our stronger balance sheet in FY 2020-21 is the outcome of optimal capital allocation, disciplined treasury management and prudent deleveraging to reduce finance cost and strengthen profitability. We will continue to fulfil all fiduciary responsibilities vested upon us by the investing community.
Chief Financial Officer
At JSW Steel, we work in a capital-intensive industry with a history of volatile prices. Therefore, we continuously seek to improve our financial profile and believe that a strong financial position will be critical to support our future growth.
We also maintain a strong focus on cost management and prudent investment in new projects. We have developed robust financial principles and business criteria to assess potential acquisitions and expansions. We intend to manage our capacity expansion, improve the debt maturity profile, and diversify our funding sources so as to capture market opportunities without taking on excessive risk.
In December 2020, we raised $250 million by selling bonds overseas. The bond sale was an extension to our earlier issuance in October, wherein we raised $500 million.
At JSW Steel, we access capital through diverse sources, enabled by strong relationships with domestic and international banks and financial institutions. At the end of FY 2020-21, our total debt stood at ₹ 52,615 crore, ₹ 858 crore lower than a year ago. However, this debt is inclusive of the capex of ₹ 8,233 crore, and the outlay of ₹ 6,750 crore for acquisition of ACCIL and BPSL. Hence at a net level, we have significantly deleveraged our balance sheet. Previously, we had set outer limit of our net debt to EBITDA at 3.75x. However, with strong cash flow generation and significant turnaround of acquired assets, we are now taking an internal target of 2.75x, even as capex projects are underway
1.75x
3.75x
We use derivative financial instruments to hedge the foreign currency risk arising on account of our revenue and debt portfolio. All hedging activities are carried out in accordance with our internal risk management policies, as approved by the Board of Directors, and in accordance with the applicable regulations where we operate. JSW Steel’s risk management policies attempt to protect business planning from adverse currency and interest rate movements. We do not use derivative contracts for speculative purposes.
We follow a gross hedging policy for our imports and exports. Exports are hedged using forwards. For imports, we hedge our exposure appropriately by either using forwards or options. We hedge our US dollar interest rate risk through interest rate swaps to reduce the floating rate risk. Hedging commodity is based on its procurement schedule, price risk and economic benefits through swaps. Commodity hedging is undertaken as a risk offsetting exercise and, depending upon market conditions hedges, may extend beyond the financial year. We have a policy of hedging up to 25% of our consumption. We are exposed to the interest rate risk on short-term and long-term floating rate instruments and also on the refinancing of fixed rate debt. It is our policy to maintain a balance of fixed and floating interest rate borrowings.
Read more in the Financial Review section of the Management Discussion and Analysis
