Message from the Chairman & Managing Director

Ready to ride
high with India

Dear Shareholders,
It gives me great pleasure to report yet another remarkable year at your Company – one that validates our actions towards a 'Better Everyday' and our contribution to the story of 'New India' that’s taking gigantic strides on to the world stage.

Scaling new peaks

FY 2018-19 was indeed a year of two halves for India – with very strong business environment in the first half and a challenging second half after the onset of certain strains in the overall financial system. Regardless of this, we continued to increase our domestic market share in FY 2018-19. We delivered strong profitable performance on higher steel spreads in the first half, focussed on cost reduction and brought about favourable change in our portfolio mix towards Value-added and Special Products (VASP).

We recorded the highest-ever production, shipments, revenue and EBITDA during FY 2018-19. Our capacity utilisation was at its highest at 93%, driven by improved utilisation levels in the Vijayanagar and Salem plants, which led to a 3% increase in production volumes. Our EBITDA, which reflects the strength of underlying improving operational excellence stood at `18,952 crore. Our balance sheet is strong with cash and cash equivalents of `6,269 crore as of 31 March 2019. The Board of Directors has recommended a dividend of `4.10 per share for the year.

This year, our Vijayanagar plant received the world’s most coveted recognition for quality, the Deming Prize, for outstanding practices in managing continuous improvements across all functions. Deming Prize is like a Gold medal for a large-scale manufacturing enterprise and is testimony to our operational excellence. The inclusion of JSW Steel in the National Stock Exchange (NSE) benchmark index of India’s top 50 companies, Nifty50, in September 2018 was a clear validation of our growing scale and influence, not just in terms of market capitalisation, but also in terms of our ability to consistently create value for our stakeholders. JSW Steel was also recognised as one of the “Steel Sustainability Champions” 2018 by World Steel Association.

Favourable domestic business environment

After a two-year strong steel cycle, an increase in supply, coupled with trade actions, led to a fall in steel prices globally towards the end of Q3 of FY 2018-19. Further, a series of counter-trade actions by various countries following the imposition of Section 232 by the US led to diversion of steel exports into India by steel surplus countries like Japan, South Korea and China. This combination of lower international steel prices and increasing imports weighed on domestic steel prices as well.

That said, with the general election overhang now behind us and given the strong mandate, the central government is likely to push through key structural reforms and infrastructure development projects at full throttle, at least for the foreseeable future.

India is home to 1.3 billion people and has favourable demographics with 65% of the population below 35 years age. India is modernising, urbanising and managing the rising aspirations of a large population; this is a unique opportunity in itself and the scale is unprecedented. India has set a target of becoming a US$5 trillion economy by 2024, and to bring that target within the realm of reality, the government is likely to spend heavily on developing social as well as economic infrastructure.

The ongoing affordable housing scheme, dedicated freight and industrial corridors, "Make in India" initiatives and the newly launched project to provide piped water at every home have significant potential to propel urban as well as rural steel demand. Next-generation infrastructure, gas grids, water grids, highways, etc. could witness significant investment boost.

The Indian economy is likely to grow at around 7% over the next decade. As GDP growth and steel consumption growth have displayed a strong correlation in recent past, steel demand is likely to grow at around 6-7%, which implies that the country would need to produce an additional 7 MnT of steel every year with consumption expected to cross the 100 MnT milestone in 2019.

Well positioned to capitalise on opportunities

In line with the Indian Government’s vision of Indian steel capacity increasing to 300 MnT by 2031, from 140 MnT currently, JSW Steel’s Vision is to increase our domestic capacity in India to 45 MnT – and have a global capacity footprint of 10 MnT over the same time period. We are in the midst of a large organic growth programme involving a spend of about `48,700 crore over FY 2017-18 to FY 2021-22 to expand capacity (from 18 MTPA to 24 MTPA; modernise and expand downstream capacities), achieve backward and forward integration and cost reduction. We strengthened our raw material sourcing by securing six iron ore mines in the recent mining auctions. We acquired facilities in the US and Italy, and a joint control with AION Capital in Monnet Ispat & Energy Limited (MIEL) through the Insolvency and Bankruptcy Code (IBC) route. We are also awaiting approvals from the adjudicating authority for our bid for Bhushan Power and Steel Limited.

Fiscal prudence and a relentless focus on efficient capital allocation is our guiding principle. In sync with this, we continue to pursue returns-accretive projects with a strategic intent of continuing to deliver industry-leading returns through the cycle.

Our best-in-class technology and sustained R&D initiatives helped deliver customised and innovative offerings. We remain strategically focussed on enriching our portfolio mix, VASPs are finding increasing applications in automobiles, construction and appliances. We have a strong and expanding domestic retail presence, with over 9,500 direct and indirect outlets, distributing contemporary steel products.

Vijayanagar Works is poised for even higher operational efficiency in FY 2019-20. In order to transport iron ore from the mine to the plant, we installed the world’s longest, 24-kilometre-long conveyor pipe, which will ensure zero spillage of raw material while transporting and reduce the cost of transportation. The conveyor pipe will also lower our carbon footprint and contribute towards traffic decongestion by eliminating diesel trucks in the transportation process.

Ushering in Industry 4.0

We have deployed various new-age technologies, including Industry 4.0 interventions such as Machine Learning, Internet of Things (IoT) and Artificial Intelligence (AI); powered simulations and optimisation engines; and computer vision to enhance productivity, minimise human intervention and ensure greater safety. The digital tools deployed at Dolvi Works are facilitating enhanced tracking and predictability of the schedule of our ongoing expansion project, which will drive on-time completion within the budgeted cost.

We have created ‘connected factories’ in procurement and large capital projects to track and manage various processes, which has improved transparency and lowered manual interventions. Computer vision-aided video analytics is being used to drive manual process time reduction, enhance throughput and improve productivity of Steel Melting Shops (SMS). Big data and analytics-driven real-time models are being used to reduce power consumption and associated losses.

In the past two years, we have implemented over 100 digital technology projects across manufacturing, supply chain, sales and procurement, which helped generate approximately `180 crore in accrued saving. We have envisaged additional cost saving of `300 crore in FY 2019-20 from digital-led projects. We will pursue further digital initiatives to create differentiation and innovation. Using analytics, robotics and hybrid cloud, we are aligning business processes with the dynamic sectoral and economic realities.

Being better by doing good

We are driven by integrated thinking and follow a multi-capital approach to value creation (including other non-financial dimensions of capital like human, social, intellectual and natural). We maintain an unwavering focus on Environment, Health and Safety (EHS) and engage continuously with the communities who are in the direct impact zones of our operations. That’s why, our Corporate Social Responsibility (CSR) initiatives go way beyond compliance. The outreach programme at JSW Foundation has been instrumental in positively impacting the lives and livelihoods of more than 1.5 million people.

In Vijayanagar, our hospital equipped with the latest medical facilities and trained doctors continues to play a crucial role in ensuring a healthy community. In Dolvi, our mangrove plantations have helped regain the lost ecological balance, and have facilitated the sustenance and livelihood of the local community.

As a large steelmaker, we depend on natural resources for running our operations. Across the value chain, we strive to reduce the usage of water, energy and other resources and recycle them wherever possible. We have undertaken several projects across our facilities to minimise our environmental impact. Our capacity expansion projects ensure that all new production units exceed compliance under the Indian as well as Euro emission norms.

The road ahead

Globally, and especially in India, steel is expected to witness sustained demand growth. Trends such as recyclability, light weighting and better design are on the horizon and are expected to impact consumption patterns. We expect large demand for high-tensile, high-strength steel, tailored to our customers’ requirements.

As we move forward, we will continue to focus on maximising value per tonne in steel, driven by technology and R&D, and drive portfolio mix shift towards 50%+ of VASP. Our expansion projects will focus on value accretion and profitability while catering to the nation’s growing appetite for steel for developing infrastructure and catapulting itself to a global economic superpower over the next decade.

As we continue our journey of scaling new peaks while being better everyday, I would like to thank the Board for guiding me to execute my responsibilities in the best possible manner. I would like to extend my gratitude to each and every member of our team for their relentless efforts in making JSW Steel a leading steel company in the world. I would also like to thank all our stakeholders, Board, Bankers and the Government authorities for the support and assistance provided throughout our journey.

I solicit your continued cooperation.


Sajjan Jindal