Square Four Projects India Ltd Management Discussions

Jul 25, 2024|11:55:00 AM

Square Four Projects India Ltd Share Price Management Discussions

1. JSW Steel- An Overview

JSW Steel is Indias leading integrated manufacturer of carbon steel products, with an export presence in over 100 countries across five continents. In 2016, the company was ranked tenth among the top thirty-seven world-class steelmakers according to World Steel Dynamics, based on a variety of factors. In particular, the Company achieved the full rating (10/10) on the following criterias: conversion costs & yields, expanding capacity, location in high-growth markets and labour costs. This ranking puts the Company ahead of all other steelmakers based in India.

The Company has significantly expanded its steelmaking capacity in India. It has increased from 1.6 MTPA in 2002 to an installed crude steel capacity of 18.0 MTPA in 2016, through organic and inorganic growth strategies. Its current operations in India comprises 12.50 MTPA (around 70% of the capacity) of flat products and 5.50 MTPA (around 30% of the capacity) of long products. JSW Steels extensive portfolio of flat and long products includes hot rolled coils, sheets and plates, cold rolled coils and sheets, galvanised and galvalume products, pre-painted galvanised and galvalume products, thermo mechanically treated (‘TMT) bars, wire rods and special steel bars, rounds and blooms, plates and pipes of various sizes and cold rolled non-grain oriented products. The Company is also one of Indias largest producers and exporters of coated flat steel products.

The primary factors that affect JSWs Steel operations comprise: a) sales volume and prices, and b) production costs. The Company derives its revenue primarily from the sale of finished steel products, and the steel market is substantially driven by changes in supply and demand nationally and internationally. The Companys sales revenue also depends on the price of steel in the international markets. The global steel price, in turn, depends upon a combination of factors, including the availability and cost of raw material inputs, fluctuations in the volume of steel imports, transportation costs, protective trade measures and various social and political factors other than the worldwide steel production, capacity and demand.

In the recent years, the steel industry, and the key raw material (iron ore and coal mining) industries have seen significant volatility. It happened largely due to a sharp fall in demand, an outcome of the global economic crisis. While the global economy showed signs of recovery in 2010, subsequent years have been volatile primarily due to the sovereign debt crisis in certain European countries, such as Greece, Portugal and Cyprus. At present, the improving macroeconomic environment may help revive the demand cycle for steel.

Despite lack of momentum in the global economy, uninspiring demand growth in India and liquidity crunch following the Governments demonetisation initiative, JSW Steel reported a strong performance. This is the outcome of its global and domestic strategies that validate the Companys Will to Win.

Manufacturing Facilities

Locations Capacities Products
Vijayanagar, Karnataka 12 MTPA Slabs, Billets, HR coils and sheets, Cold Rolled Close Annealed (CRCA) coils and sheets, Galvanised products, Non-grain Oriented Electrical Steel, Wire Rods, Bar Rods and Angles
Dolvi, Maharashtra 5 MTPA Hot Rolled coils (HRC) and Bar Rods
Salem, Tamil Nadu 1 MTPA Special steel long products
Salav, Maharashtra** 0.9 MTPA Direct Reduced Iron (DRI) and Hot Briquetted Iron (HBI)
Vasind, Maharashtra* 0.42 MTPA Galvanised, Galvalume and Colour Coated products
Tarapur, Maharashtra* 0.76 MTPA Galvanised, Galvalume and Colour Coated products
Kalmeshwar, Maharashtra* 0.58 MTPA Galvanised, Galvalume and Colour Coated products

* Belongs to JSW Steel Coated Products Limited, a wholly owned subsidiary. (Capacity w.r.t GI / GL)

** Belongs to JSW Steel (Salav) Limited, a subsidiary

2. Economic Review

2.1 Global Economy

Global economic activity improved in the second half of CY2016, especially in advanced economies. Growth picked up in the US as firms grew more confident about future demand. The economy also recorded a lower rate of unemployment and buoyant consumer demand. In the aftermath of the Brexit vote, the Euro area growth was also resilient on the back of strong domestic demand and continued easing; the growth in the United Kingdom remained robust on the back of resilient spending. Japans performance has also been on the upside with strong exports.

However, the global economic growth, at 3.1% on a y-o-y basis, fell short of expectations in CY2016 as deceleration in key emerging markets and developing economies (EMDEs) overshadowed the modest recovery in major developed countries. The EMDEs contribute to more than half of the global economic growth rate. Their deceleration was accompanied by a modest increase in commodity prices, subdued global trade, financial market volatility and weakening capital flows. Although Chinas growth turned out to be better than expected on the back of policy stimulus, it was lower than CY2015. India fared better than the world in terms of growth, even though the demonetisation exercise temporarily threw a challenge. Brazil, on the other hand, remained mired in a deep recession. Activity remained weak in fuel and nonfuel commodity exporters more generally, while geopolitical factors held back growth in parts of the Middle East and Turkey.

IMFs World Economic Outlook (Update)

Actual (%)

Projection (%)

Year 2015 2016


World Output 3.4 3.1 3.5 3.6
Advanced Economies 2.1 1.7 2.0 2.0
Emerging Market and Developing Economies 4.2 4.1 4.5 4.8
WorldTradeVolume (Goods and Services) 2.7 2.2 3.8 3.9
Advanced Economies 3.7 2.1 3.5 3.2
Emerging Market and Developing Economies 1.4 2.5 3.6 4.3
Commodity Prices (US$)
Oil -47.2 -15.7 28.9 -0.3
Nonfuel (average based on world commodity export weights) -17.4 -1.9 8.5 -1.3
Consumer Prices
Advanced Economies 0.3 0.8 2.0 1.9
Emerging Market and Developing Economies 4.7 4.4 4.7 4.4

Global economic challenges

• Recent political developments highlight a fraying consensus about the benefits of cross-border economic integration. The major policy shifts might further intensify protectionism and widen global imbalances.

• Stumbling oil prices triggered a global economic volatility, whose effect spilled over to other sectors. The prices of Brent Crude declined as low as USD 27.67 per barrel.

• The US economy is expected to run into the limits of full employment, and push inflation higher as a result of additional growth. However, this is expected to unfold in 2018 onwards.

• Tax reforms, such as an amnesty for multinational companies that repatriate foreign profits, is expected to come to effect. These reforms will create even bigger budget deficits, which in turn will stimulate more growth and inflation.


There has been an acceleration in growth in advanced economies, primarily owing to reduced inventories and marginal recovery in manufacturing output. Stronger activity and expectations of more robust global demand, coupled with agreed restrictions on oil supply, have helped commodity prices recover from their troughs in early 2016. Oil prices increased consequent to an agreement among major producers to trim supply. Activity is projected to pick up in emerging market and developing economies, because conditions in commodity exporters experiencing macroeconomic strains are gradually expected to improve. This improvement is likely to be supported by a partial recovery in commodity prices and reduced deflationary pressures. With strong infrastructure and real estate investment in China as well as expectations of probable lower outlay in infrastructure supplies in the US, prices for base metals have also strengthened. Although core inflation rates have remained broadly unchanged and generally below inflation targets. Besides, headline inflation rates have recovered in advanced economies in recent months with the bottoming out of commodity prices.

However, multiple geopolitical changes still create some concern. As per the World Steel Association, the US policy uncertainties, Brexit, the rising populist wave in current European elections and the potential retreat from globalisation and free trade under the pressure of rising nationalism add a new dimension of uncertainty in the investment environment.

According to the International Monetary Fund (IMF), the global economic activity is picking up with a long awaited cyclical recovery in investment, manufacturing, and trade. It has projected economic activities to improve in both advanced economies as well as EMDEs in CY 2017 and CY 2018, with global growth projections at 3.5% and 3.6%, respectively.

2.2 Indian Economy

Indias economic growth is gradually improving since 2014. The favourable policy as well as executive reforms by the Government to support strong and sustainable growth, prudent fiscal regime and calibrated monetary easing that reigned in inflation have helped to strengthen macroeconomic stability. The lower crude oil prices have also helped to reduce current account deficit, improve fiscal positions, and lower inflation. This, in turn, has helped boost economic activities in India. Driven by these positive developments, the country has emerged as the worlds fastest growing major economy.

However, according to estimates by the Central Statistics Office (CSO), Indias GDP growth has moderated in FY 2016-17 to 7.1% from 7.9% recorded in the previous financial year. This happened largely owing to the demonetisation initiative that led to temporary de-circulation of money. The situation has largely normalised, following the Governments re-monetisation process.


• Indias economy is the third largest in the world (in PPP terms), with the GDP at USD 8 trillion (Source: World Bank)

• In FY 2016-17, the agricultural sector recorded an encouraging growth of 4.1% on a y-o-y basis, thanks to a normal monsoon.

• In contrast, the industrial sector grew by 5.2%, whereas the service sector growth was 8.8%.

• The performance of the external sector has shown signs of improvement from the 3rd quarter of FY 2016-17. This improvement can be attributed to economic normalisation of the global economy.

• The total FDI investments in India received during FY 2016-17 rose 18% on a y-o-y basis to USD 46.4 billion, indicating that the Governments effort to improve the ease of doing business and relaxation in FDI norms are yielding positive outcomes.


The growth momentum should rise, driven by the Governments policy initiatives in areas such as taxation (GST), foreign direct investment (FDI), and the ease of doing business, among others Other major factors helping India stay as a bright spot in the global economic landscape include the lower global oil price, with positive impact on the countrys import bill, a well-regulated monetary policy by the Reserve Bank to stabilise prices, and improving fiscal condition. The Governments endeavour to drive a bigger as well as a cleaner GDP is expected to augur well for the economy in the medium and long terms.

The growth recovery has primarily happened due to discretionary spending, public investment and FDI reforms. The introduction of GST and higher outlays in the Budget 2017 are expected to drive growth as well.

3. Steel Sector

3.1 Global Steel Sector

The global steel consumption grew by just 1% on a y-o-y basis to 1.52 billion tonnes in CY 2016. Although the figure declined in 1Q CY 2016, it started improving from 2Q CY 2016 and accelerated during 4Q CY 2016. This happened mainly due to an improving apparent consumption in China where the Governments mini stimulus measures drove buoyancy in infrastructure investment and the housing market. The apparent consumption in China appeared in the green than the largely expected negative 4%. However, the statistic remained depressed in CIS, Middle East, Africa and Americas.

The global crude steel production grew marginally at 0.8% y-o-y to 1.63 billion tonnes in CY 2016. China, India, Turkey and Ukraine were the only four countries among the top 10 steel-producing nations to witness growth in steel production in CY 2016. During the year, China recorded a 1.2% y-o-y increase in production, as the worlds largest producer reversed the decline, it witnessed in Jan-Feb 2016. Crude steel production decreased in Europe, the Americas and Africa.

However, the global crude steel output grew strongly at 3.3% y-o-y in second half of the year with increase in all major steel producing regions except South America, despite the fact that the global steel industry continues to face headwinds of overcapacity and weak demand. The production growth in China further accelerated to 3% y-o-y in the second half of the year.

Steel production of top 10 steel-producing countries:

Rank Country 2016 (million tonnes) 2015 (million tonnes) % Change
1 China 808.4 798.8 1.2
2 Japan 104.8 105.1 (0.3)
3 India 95.6 89.0 7.4
4 United States 78.6 78.8 (0.3)
5 Russia 70.8 70.9 (0.1)
6 South Korea 68.6 69.7 (1.6)
7 Germany 42.1 42.7 (1.4)
8 Turkey 33.2 31.5 5.2
9 Brazil 30.2 33.3 (9.2)
10 Ukraine 24.2 23.0 5.5

(Source: World Steel Association)

The global steel prices started recovering in 1Q CY 2016 with: a) broad-basing of trade remedial actions across other countries, which started in CY 2015; b) sudden spike in iron ore prices in March 2016 beginning; c) tightness in physical markets in China ahead of enforced production cuts during an international horticultural exposition; d) restocking demand led by infrastructure and construction sectors in China with Chinese Governments thrust on stimulus. This rise in global steel prices in March-April 2016 drove a sharp increase in steel production in all major regions during 2Q CY 2016 (except Europe and South America). Global steel capacity utilisation in June 2016 jumped to 71.8%.

The countries with export focused steel industry like China, Japan, Korea and Russia continued to flood global steel markets with exports at predatory prices. The Japanese and Korean export prices remained at a discount, compared to the respective domestic market prices. With surge in production not being supported by underlying demand, steel prices started declining towards the end of 2Q CY 2016. However, with a sharp surge in coking coal prices from August-September 2016 on the back of tightness in physical markets, steel prices again moved up, reflecting a movement in raw material prices. The steel prices continued to firm up until March 2017 with 1Q CY 2017 coking coal contract price settling at USD 285/t and jump in seaborne iron ore prices.


According to the World Steel Associations forecasts, the global apparent consumption of finished steel is expected to grow by 20.2 million tonnes i.e. 1.3% to 1.54 billion tonnes in CY 2017. The apparent consumption in China is expected to remain flat at 681 million tonnes. The steel consumption in Emerging and Developing economies (ex-China) is expected to increase by 4% to 452.7 million tonnes. As for the developed economies, consumption is expected to grow by 0.7% to 401.5 million tonnes. The optimism for demand recovery is based on the following factors:

Developed markets

The new US administration has promised to unveil an ambitious infrastructure package, which will include building new roads, highways, bridges, airports, tunnels and railway lines across the country. This is expected to boost steel demand significantly. Taking a cue from a resurging global economy and a weak yen, Japans steel demand is also expected to recover in a stable manner. While Europe is still at the cusp of a political turnaround, positive developments are expected with the current monetary policy. Some stability in the region is bound to garner future investments. The recent French election that has selected a centrist leader, who is supportive of free trade, is a welcome change.


Chinas economy is expected to see managed growth deceleration and restriction by more than 20 cities on property market since March 2017 point to lower steel demand going forward. WSA has also forecasted only a flat demand scenario in China in CY2017

Emerging countries (ex-China):

Emerging countries of the world contribute to 30% of the total global steel demand. Except for the possible currency volatility risk dependent on the US dollar, the ASEAN nations are expected to throw a solid growth year. A stabilising trend is evident in BRICS nations such as Russia and Brazil, which are likely to put forth modest growth figures. India is also expected to grow encouragingly, even though growth will be marginally stunted due to demonetisation.


MillionTonnes (MT)

y-o-y % growth



2018(f) 2016


European Union (28) 157.4 158.2 160.4 2.3 0.5 1.4
Other Europe 40.7 41.7 43.2 0.6 2.6 3.5
CIS 48.7 50.2 51.9 -4.1 3.2 3.4
NAFTA 132.2 135.2 138.5 -1.5 2.2 2.4
Central & South America 39.4 40.8 42.7 -13.6 3.5 4.7
Africa 37.9 38.4 40.0 -2.1 1.5 4.1
Middle East 53.1 54.8 56.8 -1.3 3.1 3.7
Asia & Oceania 1,005.6 1,016.0 1,015.0 2.3 1.0 -0.1
World 1,515.0 1,535.2 1,548.5 1.0 1.3 0.9
World excl. China 833.9 854.2 881.1 0.7 2.4 3.1
MENA 72.6 74.4 77.2 -0.5 2.5 3.8
Developed Economies 398.7 401.5 406.2 -0.1 0.7 1.2
Emerging & Developing Economies 1,116.3 1,133.7 1,142.3 1.3 1.6 0.8
Emerging & Dev. Econ. excl. China (Source: World Steel Association) 435.3 452.7 474.9 1.4 4.0 4.9

Downside risks to this outlook emanate from the high corporate debt and real estate market situation in China, Brexit uncertainties and possible further escalation of instability in some regions. Meanwhile, raw materials price volatility is expected to subside with increased availability unlike in CY2016. Trade remedial measures should continue to influence trade flows, and, in turn, regional steel price. Thus, short-term remedial actions alone will not suffice, proactive measures need to be adopted for sustainable industry growth.

Key Sectors Determining Steel Demand Oil & Gas

Globally, the industry is yet to witness a return to sustainable equilibrium in terms of demand and supply. However, the OPEC decision to cut production should help accelerate the drawdown of global oil inventories, even if OPEC countries do not completely deliver on their announced production cuts. With the oil price issue being tackled, the sector will see continued investments and should create opportunities for the steel industry.

Metal & Mining

The global mining industrys value and production growth outlook for CY 2017 will gradually improve over the course of the year as metal prices are likely to trend higher over the coming quarters. According to estimates, an average growth rate of 13.5% between CY 2017 and CY 2020 will represent a significant improvement.


Globally, an average USD 3.3 trillion is to be spent to sustain the current rates of growth. Emerging economies alone will account for 60% of the figure. Thus, the steel industry can expect further demand from this sector.

Capital Goods

According to the IMFs World Economic Outlook, after several consecutive quarters of lacklustre growth, capital goods industry along with consumer durables recovered in late 2016; and the trend is expected to continue. Since steel is a major raw material for manufacturing machinery, this industry can drive steel demand sector.

3.2 Indian Steel Sector

During the year, Indias steel sector was impacted by intense competitive pressure with a surge in domestic steel production and elevated level of steel imports at predatory pricing. In FY2016-17, Indias crude steel production grew by 8.5% y-o-y to 97.4 million tonnes. India imposed ‘Minimum Import Price (MIP) in Feb 2016 on various iron and steel products, after seeing that the provisional safeguard duty of hot rolled sheet failed to have a desirable impact on unbridled and unfair flow of steel imports into the country. This was an emergency provision, which provided some relief to the industry.

Later on the Government imposed provisional anti-dumping duty on: hot rolled and cold roll products in August 2016; wire rods in November 2016; and colour coated rods in January 2017 as the industry needed adequate, swifter and longer shelf-life trade remedial measures to check unbridled and unfair steel imports. India also notified final safeguard duty on hot rolled sheets and plates in November 2016. However, steel imports remained at around 8 million tonnes on an annualised basis, despite these trade remedial measures. The domestic steel industry suspects circumvention of these trade remedial measures. Therefore, a stringent monitoring mechanism is required.

The situation was further aggravated by the fact that the apparent finished steel consumption in the country grew by just 2.6% y-o-y for the same period. Indias steel demand was expected to gather momentum in the second half of FY2016-17, driven by the Governments measures to drive the economy and manage quantifiable progress on various policy reforms. Normal monsoon and the Seventh Pay Commission announcements were also likely to drive consumer discretionary spending. However, the steel demand did not to see the desirable upswing in the second half of the year, amid poor liquidity, following the Governments de-monetisation initiative. This led to a liquidity crunch and a contraction of the major consuming sectors such as real estate.

However, this does not negate the fact that the long-term potential of the Indian steel industry remains bright. The opportunities for the industry have been identified and efforts are being taken by both public and private entities to achieve sustainable growth.

Major Changes in the Regulatory Landscape in CY2016

2016 was the year of reforms in the Indian steel industry. The timely remedial measures by the Indian Government, shielded the Indian steel sector from succumbing to external threats of dumping and uniform trade. The measures taken comprise:

BIS (Bureau of Indian Standards) Norms

Last year, the BIS norms were laid down for the steel industry and production of steel adhering to those norms was made mandatory. The import of steel was also restricted to such overseas firms that had acquired the BIS license to export to India. This reform sought to bring consistency and improvement in steel quality to compete with international standards.

Annulling Classification

To remove the stigma of using steel produced by primary steelmakers in Government projects and provide equal opportunity to all steelmakers, the Classification of steelmakers as primary, secondary and integrated was scrapped by the Government. This is widely seen as a timely measure to ensure a level-playing field to all players.

Railway Freight Reforms

In May 2016, the Government removed the differential railway freight for the transportation of iron ore and pellets for domestic use and exports. The reform gave the much-needed boost to iron ore exports. Such a move may not augur well for steel producers, as it does not differentiate between quality of products.

Anti-dumping Measures

Various trade measures were put in place by the Government in 2016. Anti-dumping duties on China, the United States and other countries proved to be a significant relief for domestic steel producers. A Minimum Import Price (MIP) imposed on certain steel imports in February last year for a period of six months was later extended. This restricted low-priced steel imports into India to a very large extent.

Safeguard duty is another measure adopted by the Government. The Government defended its move at the WTO by asserting that the introduction of such a measure was imminent, and that the MIP would be phased out eventually.

Performance FY 2016-17

Crude production (MT)

FY13 FY14 FY15 FY16


Public sector 16.48 16.77 17.21 17.92 18.48
Private sector 61.94 64.92 71.77 71.87 78.91

Steel Consumption (MT)

FY13 FY14 FY15 FY16


73.48 74.10 76.36 81.53 83.93

Advantage India

National Steel Policy 2017 (NSP):

The National Steel Policy (NSP) 2017, released by the Government, aims to increase steel production. Its objective is to make India self-sufficient in steel production and projects crude steel capacity of 300 million tonnes (mt) and per capita consumption of 160kg of finished steel by 2030-31. As a part of its focus area, the policy aims to address adequate local manufacturing to meet the demand for high-grade automotive steel, electrical steel, special steels and alloys for strategic applications by the same year.

The NSP has nine core elements to it. These are the following:

1. 300 MnT steel-making capacity by 2030

2. 160 per capita steel consumption by 2030

3. Preference for domestically produced steel in Government procurement

4. Export 24 MnT steel (10% of production) by 2030

5. Reduction of imports to nil by 2030

6. Domestically produce value added steel-CRGO, special steel, and alloys

7. Reduce import dependence on coking coal to 65% by 2030-31

8. Focus on pelletisation and installation of slurry pipelines and conveyors

9. Emphasis on BF/BOF technology

Over the next five years, the share of large players are expected to rise further to 53%, with most of them adding capacities through the blast furnace route. Even in the long term, steel sector analysts expect the blast furnace route to continue its dominance.

The revamped National Steel Policy, with ambitious targets, expects to garner an investment to the tune of Rs. 10 lakh crore. However, any forecasted growth for the future would mandate scaling up of facilities at the earliest. An impediment in achieving this would be a lack of greenfield lands. In the present regulatory environment, large steel companies could be the major beneficiaries of the policy.

There is an inherent direct impact of the NSP on the countrys development as much of the efforts will be driven towards increasing consumption in housing and infrastructure sectors. The new policy, if properly directed, can certainly equip the domestic steel industry, making it globally competitive. With the introduction of the NSP and a supportive business environment, the steel makers of the nation can capitalise well on the same, building capacity for the forecasted demand.

In India, overall consumer discretionary spending, public capex on ‘Rurban infrastructure development and foreign direct investment have continued to improve, supporting a gradual growth recovery.

The increased allocation for infrastructure development at Rs. 4 trillion in the Union Budget with thrust on affordable housing, water and gas pipelines, renewable energy and road sector, and expected recovery in rural demand on the back of normal monsoon expectations augurs well for steel consumption growth in the country. We expect the Indian steel demand to grow by around 4 million tonnes i.e. around 5% in FY2018.


According to the World Steel Association, India will contribute 5.1 million tonnes out of the forecasted growth of around 20 million tonnes in global steel demand during CY 2017.

In the short and medium term, the steel industry is set to grow at a 6-6.5% CAGR according to CRISIL. This sets the stage for steel producers to grow in line with the steel demand and at the same time capitalise on Government policies. With several budgetary allocations boosting infrastructure, the demand of steel and steel products is expected to rise. Another major policy reform favouring the Indian companies is the recent ruling that domestic steel will be given preference in Government projects as part of the Make in India programme.

4. Business Review

JSW Steel registered significant growth, despite a relatively modest industry and GDP performance. The Company recorded its highest ever crude steel production at 15.80 million tonnes during FY 2016-17, surpassing the guidance of 15.75 mt. In FY 2016-17, JSW Steel has achieved consolidated sales of 14.7 million tonnes, a growth of 20% y-o-y in overall sales driven by highest ever export sales of 3.80 million tonnes covering more than 100 countries. This achievement comes on the backdrop of a sluggish steel demand growth at 2.6% y-o-y in India.

In the first nine months of FY 2016-17, the Company witnessed incremental domestic growth on the back of normal monsoon, domestic reforms, improved private consumption, higher automobile demand and better rural offtake. However, during later part of the year, some market segments faced temporary negative consumption shock due to demonetisation of high- denomination currency notes. Against this backdrop, the Company strategically enhanced export sales to offset domestic slowdown, with continued focus on enriching the product mix.

The Domestic-Export Ratio over the two years is given below:

Year Domestic Exports
FY 2016-17 74% 26%
FY 2015-16 88% 12%

Highlights of FY 2016-17

• Total Sales up by 20%

• Export Sales up by 153%

• Value-added product share in total business at 34% to over 5 million tonnes

• Share of branded sales in total retail sales increased to 49% in FY 17 from 45% in FY 16.

Product Performance

JSW Steel has a diversified portfolio and the Company always aims to enrich its product mix with a sharp focus on value-added and special products sales. Such a strategy translates into higher profitability.

4.1 Flats

Flats comprised 74% of the product portfolio in FY2016-17. Overall flat product sales has registered a growth of 17% y-o-y with increased production volume. Better opportunity in the export market led to a growth for hot rolled, cold rolled and coated products.

4.1.1 Hot Rolled

Hot Rolled (HR) coils and sheet are manufactured in Vijayanagar and Dolvi plant. HR products comprised 43% of product portfolio in FY2016-17. During the year, sales volume of hot rolled coil and cut to length sheets / plates increased by over 16% y-o-y.

Key Sectors

JSW Steel is a leading supplier of steel to construction& infrastructure, industrial - engineering, pipes & tubes, automotive and energy sectors.

During the year, JSW Steel has played a key role in supplying steel to some of the major water connectivity projects in the country.

4.1.2 Cold Rolled

Cold Rolled (CR) coils and sheets are manufactured in Vijayanagar Works. CR products comprised 17% of product portfolio in FY2016-17. During the year sales volume of CRCA grew by 27% y-o-y.

The Companys CR products are well accepted by customers due to their superior surface appearance, uniform mechanical properties and excellent draw ability. The Company is the only steel producer with the capability to produce wider width up to 1870 mm and advanced-high strength steels grades up to tensile strength of 980 MPa in India.

Key Sectors

Cold Rolled (CR) products in India is significantly consumed by Automotive and Industrial & Engineering sectors.

The automotive sector witnessed a moderate growth of 6% during the year, with an overall production of vehicles in India, crossing the 25-million mark. For the first time, the Indian passenger vehicle and utility vehicle production crossed the 3 million mark. JSW Steel continues to focus on the automotive sector; and has grown by 11% y-o-y in the same period. Smooth and quick approvals of CR products from automotive companies resulted in a fast ramp-up of automotive steel sales. The cold rolled coils, galvanised and galvannealed steels supplies into the automotive customers in India, both multinational and domestic, leading to commercialisation of orders.

The Company has a Joint Venture with Marubeni Itochu Corporation for service centres. The service centre in Pune has ramped up in the last financial year and a second service centre in North at Palwal is under commissioning. This tie-up will help the Company to service the processed steel requirements of the discerning automotive customers.

In the Packaging Sector, CR products received good response due to its superior surface, tight thickness tolerances and uniform mechanical properties.

Electrical Steel products are produced at state-of-the-art facility at Vijayanagar works. This steel has usage across sectors such as electric motors, generators, nuclear power station, power generation plant and equipment, domestic appliances, transformers and automotive electricals. Swift approvals from customers has resulted in a rapid ramp-up of capacity utilisation. JSWs Steel exclusive service centre provides customers ready-to-use electrical steel products. The Company is prepared for Indias journey towards energy efficiency and infrastructure development with expansion of grade range to high silicon alloy content, development of customised high permeability grades and a wide range of insulation coatings.

4.1.3 Galvanised

Galvanised coils and sheets are manufactured in Vijayanagar, Vasind, Tarapur and Kalmeshwar Works. Galvanised products comprised 11% of product portfolio in FY2016-17.

Key Sector

Galvanised products in India are significantly consumed by the construction and infrastructure and consumer durables sectors. Eco-friendly Zero Spangle Organic coated ROHS compliant GI produced at the Companys Vijayanagar facility was introduced during the second half of the financial year. The product has been well accepted and approved by all major appliance, panel and duct manufacturers.

Solar Industry holds a lot of promise with the Government of India targeting 100 GW of capacity by 2022. Keeping in mind the tough operating environment of solar structures, the Company has introduced a special grade coated product- JSW GALVOS, to increase the life of the structures. Galvalume in the thickness range of 1.5 mm has been specifically developed for solar applications. Our efforts have ensured that every second solar structure is made with JSW Coated Steel. We are collaborating with few solar developers of international repute to offer customised solutions for their global projects.

4.1.4 Colour Coated

Colour coated coils, sheets and profiles are manufactured in Vasind, Tarapur and Kalmeshwar Works. Colour Coated products comprised 3% of product portfolio in FY 2016-17. During the year, the total sales volume of colour coated products increased by 15% y-o-y.

Key Sectors

Major consumers of Colour Coated products in India are Construction & Infra and Consumer Durables sector. JSW Colouron+ and JSW Pragati are colour coated brands of JSW Steel and enjoy high market share in semi-urban and rural region catering to the needs of Individual Home Builder (IHB) segment.

Appliance industry Continued to grow at more than 11%, despite effects of demonetisation faced during the third quarter of the financial year. The Company has made substantial developments in the appliance sector utilizing its state-of-the-art appliance grade coating line at Vasind. Colour coated sheets from the Company are approved by all large appliance players. As a part of the Governments Make in India drive, focused efforts are being made to develop VCM door panels for refrigerators and washing machines. Through joint product development initiatives with few appliance players, we have introduced zinc aluminium coated products as an alternative to regular galvanised product, thereby offering longer product life cycle to its customers. Special IF grade steel was developed and commercialised to cater to the increasing demand for dish antennas.

4.2 Longs

Long products comprised 21% of the product portfolio in FY 2016-17. During the year, long product sales increased by 13% y-o-y.


TMT Rebars are manufactured in Vijaynagar Works and Dolvi Works. It comprised 14% of product portfolio during FY 2016-17. During the year, the total sales volume increased by 19% y-o-y. JSW Neosteel, the TMT brand, has increased penetration in semi-urban and rural areas with substantial business volumes from South and West India.

Key Sectors

JSW Neosteel was used in major projects in the country from Metro railway projects, Indian Railway Projects, Aerospace, Defence projects, Port & Airport Projects, Expressways & Highways and Critical atomic power projects. The Company also caters to prominent educational institutions, hospitals, IT Parks and high rises.

JSW is also proud of being a part of Indias growth story through supplying steel to metro rail projects in various cities, Chennai, Mumbai, Delhi, Kochi, Nagpur, Ahmedabad, Jaipur and Lucknow to name a few.

4.2.2 Alloy Steel

Alloy steel products are manufactured at JSW Salem Works. The Company is the largest domestic producer of spring steels flats, alloy steel rounds and bars and alloy steel wire rods.

Product Development Highlights

Twenty new grades of special steel were approved, which included high-value alloyed and micro alloyed steel for various components of automotive engine, transmission, bearings and suspension.

The Company is the largest domestic producer of spring steels flats, alloy steel rounds and bars and alloy steel wire rods.

4.3 Retail Initiatives

The Companys retailer network expansion was critical during the year to reach out to large parts of India. Approximately 7,300 retail outlets, covering 575 districts across India, have created a strong foundation to leverage growth opportunities in the coming years.

New distributors were further appointed to build a stronger network. As the volumes stabilise, the Company is expanding its retail footprint to further penetrate and focus into each micro market.

TMT Rebars received major focus during the year in retail with sales increasing, despite direct effect on demand by slow-down in real estate and demonetisation.

Brand Building

The Company has been undertaking focused brand-building initiatives in TMT Rebar and Coated products categories. This year, emphasis was on engineers, retailers and distributors, apart from high-impact initiatives like ad screening in cinemas during blockbuster movies, extensive rural hoarding campaign, hoardings at strategic locations, wall painting and mobile vans.

Loyalty Programmes

JSW Privilege Club for Distributors was launched during the year. The programme aims to connect the families of the distributors to the Company and encourage community activities, fulfil training needs and hold special events. A Privilege Club for Engineers was also launched, aiming to build the knowledge base of steel usage and promote usage of modern high-quality TMT Rebars. The Company conducted influencer meets across the length and breadth of the country.

JSW Steel is dedicated towards building best-in-class brands and deliver world-class products and services to consumers.

IT Enablement- JSW iSales

JSW implemented JSW iSales, an IT system to connect distributors and retailers to JSW ERP for 100% online transactions with channel partners. This is in line with the digital focus and initiatives of the Government and the Company.

5. Financial Review

5.1 Standalone

The Companys revenues from operations in FY 2016-17 increased by 39% from Rs. 40,859 crores to Rs. 56,913 crores, primarily due to an increase in realisations and increase in sales volumes by 22%. The Company undertook multiple performance improvement initiatives during the year – from diversified sourcing strategy, optimisation of logistics costs, procurement costs, to focus on yields and productivity. As a result, the Operating EBITDA for the year grew by 81% on y-o-y basis and EBITDA margin (on net revenue from operations) stood at 22.1%. The Company registered a net profit after tax of Rs. 3,577 crores.

The Companys total net debt gearing was at 1.53 and Net Debt to EBITDA stood at 3.20x as on 31st March, 2017 as against 1.71 and 5.49x respectively that of previous year.

Highlights FY 2016-17

(In Rs. crores)


2015-16 Growth (%)
Revenue from operations 56,913 40,859 39%
Other income 255 318 -20%
Operating EBITDA 11,543 6,369 81%
EBITDA margin (%) 22.1% 17.4% 27%
Depreciation and amortisation expense 3,025 2,847 6%
Finance Cost 3,643 3,219 13%
Profit before Exceptional Items 5,131 621 726%
Exceptional Items (5,860)
PAT 3,577 (3,530)
Earnings per share (diluted) () 14.80 (14.75)

Revenue analysis

FY 2016-17 was particularly challenging for Indias steel industry. However, the companys performance was relatively strong with improvement in absolute volumes in the domestic market. The Company has also focused on the exports market and increased the value-added products sales. The sales volume stood at 14.77 million tonnes, up by 22% vis--vis the previous year. The Company maintained its share in the domestic market, while exploring opportunity in the export market.

The other operating revenue was higher by Rs. 165 crores, compared to the previous year due to higher sales tax incentives on increase in domestic sales realisation and recognition of revenue on export obligations fulfilled during the year as per Ind AS.

(In Rs. crores)
2016-17 2015-16 Change Change %
Domestic Turnover 45,322 37,590 7,732 21%
Export Turnover 10,922 2,764 8,157 295%
Total Turnover 56,244 40,354 15,889 39%
Other Operating Revenues 669 504 165 33%
Total Revenue from Operartions 56,913 40,859 16,054 39%

Product wise quantity break-up

Particulars MillionTonnes


2015-16 % Growth
Rolled products – Flat 10.97 9.20 19%
Rolled products – Long 3.06 2.71 13%
Semis 0.74 0.21 250%
Total Saleable Steel 14.77 12.13 22%

Highlights of FY 2016-17

• Increase in rolled flat products sales by 19% and increase in rolled long products by 13% y-o-y.

• Product mix improved with value-added products sales, reaching 34% of total sales.

• Export sales grew by three fold.

Other income

(In Rs. crores)


2015-16 Change Change %
Other Income 255 318 (63) -20%

Other income for the year was lower primarily due to non-recognition of interest income on loan, which has been provided for in the earlier year given to subsidiaries.


(In Rs. crores)


2015-16 Change Change %
Cost of materials consumed 27,955 20,000 7,955 40%

The Companys expenditure on materials increased by 40% from

Rs. 20,000 crores in FY 2015-16 to Rs. 27,955 crores in FY 2016-17, primarily owing to 26% escalation in production and rise in the prices of coal and iron ore.

Employee benefits expenses

(In Rs. crores)


2015-16 Change Change %
Employees Benefits Expenses 1,168 953 214 22%

Employee benefits expenses increased by 22% to Rs. 1,168 crores in FY 2016-17 from Rs. 953 crores in FY 2015-16, due to the employment of additional workforce for increased capacity and annual increase in compensation.

Manufacturing and other expenses

(In Rs. crores)


2015-16 Change Change %
Other Expenses 11,624 9,385 2,239 24%

Manufacturing and other expenses increased by 24% from Rs. 9,385 crores to Rs. 11,624 crores in FY 2016-17. This happened primarily because of an increase in sales volumes, higher power cost and freight costs. Power and fuel costs, (a 32% increase over last year, amounting to Rs. 1004 crores) rose owing to a 26% increase in crude steel production and increase in steam coal prices over that of previous year. The escalation in freight costs (by 46% over last year, amounting to Rs. 647 crores) was due to higher sales volumes and higher exports. Increase in other manufacturing cost mainly relate to higher consumption of stores and spares (a 12% increase amounting to Rs. 251 crores) and job-work/processing charges (a 34% increase amounting to Rs. 162 crores) due to an increase in the scale of operations

Finance cost

(In Rs. crores)


2015-16 Change Change %
Finance Cost 3,643 3,219 424 13%

Finance cost increased by Rs. 424 crores to Rs. 3,643 crores in FY 2016-17 from Rs. 3,219 crores. The escalation was primarily due to capitalisation of expenditure incurred towards the expansion of capacities at Dolvi and Vijayanagar and consequent interest charge to profit and loss account; and additional borrowing cost for working capital due to increased scale of operations, rise in the prices of raw material and steel, offset by lower interest costs due to reduction in base rates and repayment of loans. However, the weighted average interest cost of debt was lower by 10 bps, at 7.40% vis--vis 7.50% as on March 31, 2016

Depreciation and amortisation

(In Rs. crores)


2015-16 Change Change %
Depreciation and amortization 3,025 2,847 177 6%

The Companys depreciation and amortisation cost increased by 6% to Rs. 3,025 crores in FY 2016-17 from Rs. 2,847 crores in FY 2015-16, due to additional depreciation on capitalisation of expenditure incurred towards expansion of capacities at Dolvi and Vijayanagar and maintenance capital expenditure.

Fixed Asset

(In Rs. crores)


2015-16 Change Change %
Tangible assets 50,215 46,498 3,717 8%
Capital work-in-progress 2,745 6,204 (3,458) -56%
Intangible assets 51 62 (11) -18%
Intangible assets under development 282 236 46 20%
Total 53,293 52,999 294 1%

Gross block increased during the year primarily on account of capitalisation of the Dolvi Phase 1 Expansion project to 5 MTPA and capex incurred for increasing Blast Furnace 2 capacity at Vijayanagar during the year.


(In Rs. crores)


2015-16 Change Change %
Long-term loans 3,350 242 3,108 1286%
(In Rs. crores)


2015-16 Change Change %
Short-term loans 121 1,325 (1,204) -91%

Loan on overall basis has increased mainly due to loans provided to certain overseas subsidiaries.


(In Rs. crores)


2015-16 Change Change %
Raw Materials 3,590 2,651 939 35%
Work-in-Progress 747 588 159 27%
Semi Finished/ Finished Goods 3,702 2,327 1,375 59%
Production Consumables and Stores & Spares 1,232 1,176 55 5%
Total 9,270 6,742 2,529 38%

The average inventory holding in terms of number of days as on 31st March, 2017 was 83 days vis-a-vis 80 days as on 31st March, 2016. The value of inventories increased by 38% primarily due to higher finished goods inventory valuation rates and higher cost of coal and other raw materials, compared to previous year.

Trade receivables

(In crores)



Change Change %

Trade Receivables 3,948 2,511 1,437 57%

The average debtors i.e. collection period, in terms of the number of days as on 31st March, 2017 was 16 days, compared to 23 days as on 31st March, 2016. The increase in trade receivables was primarily due to higher sales realisation in March17, compared to March16 and extension of credit to OEM customers whose volume increased by 7% during the year.


(In Rs. crores)


2015-16 Change Change %
Long-term Borrowings 28,358 30,145 (1,787) -6%

Long term borrowings reduced by Rs. 1,787 crores mainly due to repayment / prepayment of Non-convertible debentures during the year.

(In Rs. crores)


2015-16 Change Change %
Short-term Borrowings 4,875 2,070 2,805 136%

Short-term borrowings increased by Rs. 2,805 crores during the year. This increase was primarily due to drawal of commercial paper loan to cater to increased scale of operations.

Trade payables

(In Rs. crores)


2015-16 Change Change %
Trade payables 12,609 11,011 1,597 15%

Trade payables increased by 15% primarily due to an increase in acceptances for raw material on increased volume of production, rise in raw material prices and extended credit from certain power suppliers.

Capital Employed

Total capital employed increased by 15% from Rs. 55,324 crores as on 31st March 2016 to Rs. 63,365 crores as on 31st March 2017.

The return on capital employed is 14.79% for FY 2016-17, a significant increase from 6.27% for FY 2015-16.

Own Funds

Net worth increased from Rs. 20,410 crores as on 31st March 2016 to Rs. 24,098 crores as on 31st March 2017.

The book value per share was Rs. 99.69 as on 31st March 2017 against Rs. 84.44 as on 31st March 2016.

5.2 Consolidated

During the year, the Company reported a consolidated revenue from operations, operating EBITDA and net profit after tax of Rs. 60,536 crores, Rs. 12,174 crores, and Rs. 3,523 crores, respectively. The Companys consolidated financial statements include the financial performance of the following Subsidiaries, Joint Ventures and Associate.


1. JSW Steel (Netherlands) B.V.

2. JSW Steel (UK) Limited

3. Argent Independent Steel (Holdings) Limited (ceased w.e.f


4. JSW Steel Service Centre (UK) Limited (ceased w.e.f


5. JSW Steel Holding (USA) Inc. (ceased w.e.f 28.03.2017)

6. JSW Steel (USA) Inc.

7. Periama Holdings, LLC, West virginia (ceased w.e.f


8. Purest Energy, LLC

9. Meadow Creek Minerals, LLC

10. Hutchinson Minerals, LLC

11. R.C. Minerals, LLC

12. Keenan Minerals, LLC

13. Peace Leasing, LLC

14. Prime Coal, LLC

15. Planck Holdings, LLC

16. Rolling S Augering, LLC

17. Periama Handling, LLC

18. Lower Hutchinson Minerals, LLC

19. Caretta Minerals, LLC

20. JSW Panama Holdings Corporation

21. Inversiones Eroush Limitada

22. Santa Fe Mining

23. Santa Fe Puerto S.A.

24. JSW Natural Resources Limited

25. JSW Natural Resources Mozambique Limitada

26. JSW ADMS Carvao Limitada

27. JSW Steel Italy S.r.l (w.e.f 30.01.2017)

28. JSW Steel Processing Centres Limited

29. JSW Steel East Africa Limited (ceased w.e.f 08.04.2016)

30. JSW Bengal Steel Limited

31. JSW Natural Resources India Limited

32. JSW Energy (Bengal) Limited

33. JSW Natural Resource Bengal Limited

34. Barbil Beneficiation Company Limited (ceased w.e.f


35. Barbil Iron Ore Company Limited (ceased w.e.f 19.10.2016)

36. JSW Jharkhand Steel Limited

37. JSW Steel Coated Products Limited

38. Amba River Coke Limited

39. Nippon Ispat Singapore (PTE) Limited

40. Erebus Limited

41. Arima Holdings Limited

42. Lakeland Securities Limited

43. Peddar Realty Private Limited

44. Everbest Steel & Mining Holdings Limited (ceased w.e.f


45. JSW Steel (Salav) Limited

46. JSW Industrial Gases Private Ltd. (formerly JSW Praxair

Oxygen Private Limited (w.e.f 16.08.2016)

47. Dolvi Minerals & Metals Private Limited

48. Dolvi Coke Projects Limited

49. JSW Mali Resources S.A. (ceased w.e.f 18.06.2015)

50. Periama Holdings, LLC, Delaware (w.e.f 23.01.2017)

51. JSW Realty & Infrastructure Private Limited

Associate companies

52. JSW Industrial Gases Private Ltd. (formerly JSW Praxair

Oxygen Private Limited (upto 15.08.2016)

Jointly controlled entities:

53. Vijayanagar Minerals Private Limited

54. Rohne Coal Company Private Limited

55. Geo Steel LLC

56. JSW Severfield Structures Limited

57. JSW Structural Metal Decking Limited

58. Gourangdih Coal Limited

59. JSW MI Steel Service Center Private Limited

60. JSW Vallabh Tinplate Private Limited

61. Accitalia S.p.A (w.e.f 30.11.2016)

6. Operational Overview

6.1Vijayanagar Works

Located 380 kilometres away from Bengaluru at a village, Toranagallu North Karnataka in the Bellary-Hospet iron ore belt, Vijayanagar Works (spread over 10,000 acres) is a fully integrated steel plant well-connected with both Goa and Chennai ports. Leveraging cutting-edge technologies Vijayanagar Works has emerged as one of the most efficient in terms of conversion cost globally. This unit produces many steel products in the flat and longs segment.

Key Features

The first integrated steel plant in India to:

• Reach 12 MTPA capacity at a single location

• Use of Corex technology for hot metal production

• Have a large scale, low-grade iron ore Beneficiation process

• Pelletisation based on the dry and wet process

• Only plant with combination of both non-recovery and recovery type of coke ovens

Initiatives Undertaken in FY 2016-17

Project Deep Drive

The Company implemented multiple cost optimisation initiatives under ‘Project Deep Drive at various business critical departments (logistics, agglomeration and iron making, power and others) leading to substantial cost savings.


• Optimise the mode of transportation; achieved reduction in overall freight

• Benefitted from the withdrawal of port congestion charges

• Received short lead concession on freight

• Reduced inward and outward idle freight

Agglomeration & Iron Making

• Sinter plants: Increased the usage of indigenous dolomite

• Pellet Plant (PP) 2: Reduced gas usage by 0.02 Gcal/tonnes

• Reduced gas consumption in blast furnace (BF) 3 by 3 m3/thm

• Reduced power consumption

Productivity Improvement Measures

• At Coke Oven 4, the Company modified standard operating practices and reduced moisture variation coals, which resulted in minimising cake breakages

• Modified riffier at Corex 1&2 to minimise pressure peaks to reduce tuyere burning

• Blast Furnace

Institutionalised the practice of double screening of ore, which facilitated in superior fines control Improved burden distribution and gunniting, which helped in reducing heat loss.

Optimised burden distribution which reduced fuel rate Improved furnace availability and Lance availability

• Hot Strip Mill:

Reduced FM & RM roll change time

Reduced the number of roll changes per day

Introduced CRM rundowns with 100 km and Century rundowns with 100 km in non-CRM grades with modification in RBL and HSS rolls usage

Waste Minimisation Measures

• Sold dry pit slag and EAF slag for road making

• Slag sand production increase from 500 tonnes/day to 800 tonnes/day after installation of new crusher.

• BF cyclone dust manual feeding in Waste to Wealth plant approximated to 200-300 tonnes/day from October 2016.

• CRM 1&2 Magnetic separator slurry feeding in coke oven 1&2 of approximately 3 tonnes/day since last 3 months.

Priorities for 2017-18

• Pipe conveyor system with 3,500 tonnes per hour haulage capacity to enable the transportation of 22 MTPA

• New water reservoir with a storage capacity of 32-33 million m3, to meet the water requirement

• Optimisation of PCI blend, based on coal availability

• Further optimisation of prepared burden in iron-making units

• Ensuring washable grade IOF availability from new mines secured in auction from H2

• Coil Tracking and Transport System (CTTS) and Yard Management

• Improve the value-added products in overall product basket by increasing capacity of CRM-1 complex from 0.85 MTPA to 1.80 MTPA, along with two Continuous Galvanizing Line of 0.45 MTPA each, a new 1.2 MTPA Continuous Pickling Line for HRPO products; and a new 0.80 MTPA HR Skin Pass Mill for HR Black & HRSPO products.

6.2 Dolvi Works

The integrated steel plant (present capacity 5 MTPA) at Dolvi, Maharashtra came into the JSW Steel fold in 2010. Located on the West Coast of India, the plant has a jetty with a capacity of 10 million tonnes per annum. This provides the unit with logistical advantages in importing raw materials and savings on freight cost. The unit is well connected through rail, road and sea; and has given the Company a strategic presence in Western India.

The Dolvi plant caters to several industries, including automotive, projects and construction, machinery, LPG cylinder-makers, cold rollers, oil and gas sector and consumer durables. The recent capacity addition (from 3.3 MTPA to 5 MTPA) provides the Company with an opportunity to widen its product basket and geographic footprint.

Key Features

• Well placed logistically with access to the port, leading to cost reduction

• The Dolvi plant enjoys the unique distinction of being Indias first facility that houses the Conarc technology for steel-making, along with the compact strip production technique for hot rolled products.

• With the capacity expansion of Dolvi, JSW Steel has emerged as the only primary producer of long products in Western India.

Initiatives Undertaken in FY 2016-17

• Ramped up operations at the expanded units to reach a capacity utilisation of about 85% in March17

• Developed 13 grades of high strength steels

• Commissioned the 130x130 mm section in existing Billet Caster – facilitating billet production in two sections, thereby widening the opportunity canvas and expanding the customer base

Priorities for FY 2017-18

The Company is focused on undertaking the next phase of capacity expansion – from 5 MTPA to 10 MTPA. The Company plans to adopt the BF/BOF route for steel making and the conventional Continuous Casting process for manufacturing Hot Rolled Coils.

The Dolvi plant caters to several industries, including automotive, projects and construction, machinery, LPG cylinder-makers, cold rollers, oil and gas sector and consumer durables.

6.3 Salem Works

Located advantageously at just about 350 kilometres from Chennai, the Salem plant has emerged as a global steel hub for automobiles and auto components. Salem Works is Indias largest special alloy steel facility, which primarily addresses the steel requirements of Indias automotive sector. Having acquired this facility in 2004 from SISCOL, JSW Steel enhanced its operational capacity (0.3 MTPA to 1 MTPA) and strengthened product development and process capability to transform the plant into a preferred supplier to global steel hub for automobiles and auto components. It is the leader for manufacturing special grade steel used in gears, crank shafts and bearings. It also manufactures ultra-low sulphur steel for sour-gas pipelines and alloy steel for boilers. Salem Works is an environment-friendly and zero-effiuent plant.

Initiatives Undertaken in FY 2016-17

• Commissioned the CPP – WHRB #5 unit

• Rolled the complex Hexagon-shaped product (25.5 mm) successfully

Priorities for 2017-18

• Install an additional Caster (Caster - 3) at the Steel Melt Shop to improve cast output

• Enhance the capacity of EOF-1 from 45 TPA to 65 TPA

• Install two reversible sliding stand at BRM for increasing BRM Capacity from 0.40 MTPA to 0.48 MTPA that can also handle 220 square billet, as against 160 square billet

• Add annealing lines for increasing the output of BRM Products – a downstream value addition initiative.

Salem Works is the leader for manufacturing special grade steel used in gears, crank shafts and bearings.

7. Bulk Raw Material Procurement

7.1 Raw Material Overview

During the year, iron ore and coal costs constituted the largest share of input costs. In FY 2016-17, commodity prices witnessed a large-scale volatility, due to which the steel sector was severely impacted. Coking coal spot prices recorded a sharp escalation from the end of August 2016 to the end of November 2016. This was driven by Chinas curbs in coal production, as well as constrained supply due to multiple disruptions in Australia and China. The situation further worsened by the rush of steel producers to find supplies in the spot market and better than expected steel demand in China. The coking coal prices in the spot market increased from below US $120 per tonne in August 2016 to more than US $300 tonne in November 2016.

However, there has been greater normalisation of coking coal prices. This eased the pressure on sourcing and kept costs under control. The Companys consistent focus and strategy to diversify raw material sourcing has produced the desired outcome, especially amid a turbulent commodities market. The Company has been able to strike the right balance between the sourcing of key raw materials and optimising input blend and cost.

Iron Ore

Global iron ore prices witnessed volatility during the year. To address uncertainties in iron ore supply, the Company relied on in-house Beneficiation technology to transform low-grade iron ore into higher grade usable inputs. In addition, a strategy of ensuring raw material supply security from various regions is being actively pursued. Besides, commodity prices were partially hedged, de-risking the volatility associated with imports.


The Company has placed adequate safeguards to mitigate any sudden volatility in coal prices. From contract provisions linked to markets with options, to continuous buying across troughs and peaks of a business cycle, raw material security has been fortified. The Company is making concerted efforts towards sourcing from different geographies and suppliers over the preceding few years with desired outcomes, without compromising production schedules.


Another significant cost attached to bulk raw material is logistics. A focused drive across plants was initiated by the Company during the year to optimise costs from customised solutions. The initiative has already started yielding results. The Company has been able to optimise shipping freight to a large extent. The development of a cape compliant port to handle imported cargo added to the Companys efficiency and cost competitiveness.

7.2 Raw Material Security

Backward integration and raw material security has always been important to the Companys strategy. During FY 2016-17, The Company undertook many initiatives to safeguard its raw material strategy and fortified it through acquisitions. This will further enhance the Groups raw material security and lead to integrated and efficient operations.

The new MMDR Acts transparent and competitive bidding process has provided the Company an opportunity to enhance its raw material strategy further.

Key Highlights

• The Company has secured the Moitra coking coal block via an auction process. This mine has total extractable coal reserve of around 30 MnT; and the coking grading coal is in advanced stage of development.

• The Company has won five mines in the auctions of C-category iron ore mines in Karnataka. Of these five mines, two mines (0.71 MTPA capacity) will be operational by first half of FY 2017-18 and the remaining three mines will be operational by the end of FY 2017-18. All five iron ore mines are expected to produce approximately 4.7 MTPA iron ore.

8. Energy Management

In steel making, energy management assumes a critical role when one considers the energy consumed in generating a tonne of steel. On the brighter side, the steel manufacturing process comprises exothermic reactions, which generate significant heat. If the heat can be utilised properly, it can minimise energy costs considerably. At The Company, the team is focused on maximising the use of hot air and gases generated during the various stages of steel-making to minimise the consumption of fossil fuel.

The company bagged the second prize in the Integrated Steel sector at the National Energy Conservation Award, 2016 instituted by the Bureau of Energy Efficiency, Union Ministry of Power, for its excellence in Energy Conservation and Management


• Increased injection of coke oven gas at Kiln#11; it reduced gas flaring by 0.21%.

• Installed VVVF drive at pellet plant 2 for updraft drying fan for 3.75 MW motor, resulted in 0.455 MW power saving.

• Increased the LD gas recovery by 7.1 Nm3/Tls by institutionalising superior operating practices.

• Increased waste heat recovery for power generation through non recovery coke ovens by 1.5MW.

• Received 28,710 ECerts by BEE under 1st PAT Cycle.

8.2 Dolvi

• Used Coke Oven Gas to replace Natural Gas in various processes to optimise the cost of production.

• Replaced conventional lights with LED at HSM area.

• Received approval for 2537 Energy Saving Certificates by Ministry of Power, in PAT Cycle- I.

8.3 Salem

• Commissioned a waste heat recovery boiler in Coke oven battery – saving of thermal coal

• Replaced Compressor intercoolers in Air separation plant.

• Reduced gas venting through optimisation of process and compressor operation from 10.92% to 5.96%.

• Reduced coke consumption by increasing the Hot blast temperature in BF#2.

9. Quality Management

At JSW Steel, achieving qualitative excellence is a journey and not a destination. A journey that is undertaken by the entire team to create an enriching customer experience. This is best reflected in the investments made by the Company towards incorporating path-breaking technologies, institutionalising global-best practices and creating a seamless operating environment. The Companys consistent focus on quality management has enabled it to fulfil evolving customer expectation.

Having aligned its business operations with the stringent ISO standards, the Company is now focusing on raising its qualitative benchmark by implementing the TQM system across the organisation.

To strengthen the TQM culture within the organisation, various multi-layered promotional programmes (website, newsletters, booklets and quizzes) have been initiated. The ‘0757 campaign was leveraged to inculcate the quality ethics among all employees – from the shop floor to the top floor.

As a step towards validating the effectiveness of these efforts, JSW Steel is applying for TQM diagnosis by the Deming Prize Committee (FY 2017-18) and for Deming Prize (CY 2018). The Deming Prize is the most coveted award in the field of TQM. It is conferred on corporates who have achieved tangible improvement through the institutionalisation of TQM practices.

Having aligned its business operations with the stringent ISO standards, the Company is now focusing on raising its qualitative benchmark by implementing the TQM system across the organisation.

10. Research and Development

At JSW Steel, there are two norms – the industry standard and the JSW Steel benchmark, which invariably is better than the former. The Companys spirit of challenge drives it to contest the status quo, break the norm only to raise the bar a little higher. This drive is initiated by its Research and Development (R&D) team, which focuses on innovation in a seemingly mundane industry such as steel.

11. Talent Management

At JSW Steel, talent management has always been recognised as a critical business function that facilitates in transforming boardroom strategies into business realities. It is competitive advantage that facilitates sustained delivery of profitable business growth.

At JSW Steel, the robust and resilient talent management framework facilitates in identifying and nurturing employees with long-term potential to take up critical leadership roles. The objective of this meticulous and consistent effort is to build a strong future-fit talent pool that is empowered to take the organisation into a new orbit of growth and sustainability, while at the same time driving career aspirations.

In FY 2016-17, the team identified 65 Future Fit Leaders (FFLs) from across business segments. The Talent Management team created a comprehensive capability development programme for accelerating the career progression of FFLs. This programme comprised classroom learning (leadership development interventions at Cornell University and Indian School of Business) and on-field assignments (stretch assignments and action learning projects).

Campus Engagement – Hunt for Fresh Talent

For strengthening its intellectual capital repository, the team is focused on widening the Companys footprints across campuses in India through its Summer Internship Programme initiated in 2013.

Over the years, the Company has succeeded in establishing a strong presence in most of the Tier 1 engineering and management institutes. This undergraduate internship programme has gained significant traction among most Tier 1 campuses.

Interns absorbed through this programme were further nurtured through the Graduate Rotation Programme comprising four months of training (class-room and on-job) and two fruitful rotations.

2017 Internship Programme
Programme Details Summer Internship Programme Management Internship Programme
Campus Category Tier 1 Tier 1
Degree B.Tech/B.A/B.Com/B.Sc/B.A.LLB MBA
Number of campuses targeted 16 10
Campus list IIT-Delhi, Mumbai, KGP, Kanpur, BHU, Roorkee, Gandhinagar, Madras, BITS Pilani, VJTI, LSR, SRCC, St. Stephens, FLAME, GLC, Symbiosis IIMs – Ahmedabad, Bangalore, Calcutta, Indore, Lucknow, MDI, IIFT, FMS, JBIMS, XLRI
Batch size 35 23
Internship duration 8 weeks 8 weeks
Applications Received 3000 & above 2500 & above

Learning & Development – People and Skills

The Company recognises the importance of continual professional development. It realises that a knowledgeable and experienced workforce is the key driver to deliver on the expectations of all internal and external customers.

In keeping with this understanding, JSW Steel is committed to grow the knowledge capital of every individual of its team through path-break learning and development initiatives. Learning and development is a key element of the Companys employee value proposition.

The Company initiated study and interaction with specialists, which revolves around its BUILD FOR TOMMORROW – STRATEGIC PILLARS

In 2016-17, 3000 members of the JSW Steel team underwent the systematic learning interventions with focus on next role capability building, leadership and line manager capability building, and enhancement of functional skills.

JSW Voice – Great Place to Work Survey

At JSW Steel, the management strongly believes that an engaged workforce is critical for building a sustainable organisation. This belief is aptly vindicated by the success of JSW Steel, which in less than three decades has emerged among the leading global steel producers – a position achieved primarily due to the collective efforts of an engaged team.

The Company partnered with Great Place to Work Institute, a global research and consulting firm, to administer this survey, analyse the results and recommend action areas. The multi-lingual, multi-modal survey covered 12,721 employees across plant locations, Offices and branches, measuring employee perception on five key dimensions– Credibility, Respect, Fairness, Pride and Camaraderie.

Prior to the survey, the Company conducted awareness and communication campaigns to educate employees about the process, stress on anonymity and encourage genuine feedback. Based on the responses, Great Place to Work Institute presented a detailed report on the findings and inferences to the management.

Further, the Company has benchmarked its business systems process with Indias Top 100 Great Places to Work 2016 and Manufacturing & Production Great Places to Work 2016. These benchmarks were chosen to get an in-depth insight into the Companys position vis--vis the industry and best workplaces in the country.

The Company initiated study and interaction with specialists, which revolves around its ‘BUILD FOR TOMORROW – STRATEGIC PILLARS.

12. Risk Management

JSW Steel follows the globally recognised ‘COSO framework, while undertaking its risk management initiatives. The key risks and response strategies for mitigations are given below –

Risk type Impact Response strategies
Unforeseen changes in external scenario like the following can affect resilience– The Company focuses on: nalysis
Macro Strategic risks 1) Global economic inter linkages and protectionist Government policies 1) In-house research, reports of specialised agencies and interactions with all concerned to help track macro environment.
2) Geo-political and security risks in other countries like political instability, judicial insecurity, sanctions, nationalisation, corruption, damage to installations, fraud and expropriation 2) Internal meetings ensure multi-disciplinary stress testing and regular tracking of assumptions to proactively respond.
3) Disruptive changes in technology 3) Due diligence review before dealing with uncertainties.
4) Systemic risks causing uncertainty and complexity.
Competitive dynamics & industry Cyclicality The following can affect sales and margin:
1) Adverse global and domestic demand-supply dynamics Company de-risks by –
1) Better market intelligence
2) Cyclical nature of steel industry 2) Widening and deepening customer reach
3) Unfair trade practices resulting in a surge in imports like cheaper imports from China for past couple of years 3) Broadening product range
4) Unfair trade remedial measures by other countries 4) Increased value addition
5) Segmentation planning
6) Responsive credit and pricing policy
7) Trade remedial measures Company regularly tracks -
Availability and cost of required grade of raw material (iron, ore, coal & gas) are impacted by: 1) Commodity markets to consider specific options like acquiring mines stabilised broad base of vendors from various countries through multiple ports, vendors & regions.
Raw material availability & cost 1) Global movement and parity of landed cost considering price, freight, tariff and exchange rates. 2) Government policies and vendor actions, regulatory changes in sourcing countries.
2) Domestic demand-supply gap, constraints and vendor actions 3) Contract options (long term / spot / indexing) and hedging as per approved strategy.
3) Policies on mining, allocation and tariff 4) Relationship management with vendors for regular supply and timely inputs on market insight and future trends.
Various factors can affect movement of inbound raw material & outbound goods-
1) Port related risks like – congestion, infrastructure, rail connectivity, strikes at ports, channel blockage Centralised Logistics cell for excellence ensures:
1) End to end integration
2) Railway related risks like - i) Rail track constraints, 2) Optimisation of infrastructure spend
Infrastructure & Logistics ii) Rake availability, iii) land slide on route; iv) strikes; 3) Throughput in loading unloading
v) derailment / accident 4) Evenly spread evacuation from plant
3) Shipping related risks like availability, cost, weather conditions & piracy on route 5) Material handling care & costs
4) Storage, transportation & material handling (RMHS) risks causing exposure to weather and hence affecting metallurgical property. 6) Enhancing service level through digitisation initiatives such as last mile connectivity tracking. Company de-risks through -
The following can have impact on competitive edge and operations: 1) Full-fledged R&D infrastructure
Technology & operational disruptions 1) Timely decision/ action on technology up-gradation, innovation, product development and patenting thereof to meet unarticulated product needs of consumers 2) Understanding customer needs for new products through surveys, market feedback
3) Effective management of vendors, automation systems, operating procedures, maintenance scheduling, spares management, operator training, equipment life cycle tracking
2) Inadequacy of vendor support, automation systems, spares, redundancies, operational training & maintenance 4) Mega Risk Policy insurance cover for risks causing plant interruptions and loss of profit including coverage for losses due to suppliers and customers.

13. InformationTechnology

At JSW Steel, strengthening information technology (IT) infrastructure and knowhow is a business-critical imperative, because it binds the Companys dispersed operations into a cohesive unit. It also facilitates disciplined operations and enables fast decision-making, enhancing brand reputation. The Company leverages ERP solutions for its business operations, which are pivoted on the SAP platform. Such a strategy facilitates ease in data collation, decision-making, MIS and data security. To strengthen its IT niche, the Company implemented important initiatives for aligning its business processes to dynamic sectoral and economic realities.

IT-strengthening initiatives

• Implemented the Distributor Management system for secondary sales in the retail segment

• Established the Disaster Recovery system for SAP

• Commissioned a solution for establishing a rebates and credit notes system across all the steel plants

• Automated the Customer Complaint Management System for OEM and Retail customers

• Established a Bar code based picking, stock-taking and security gate validation system

• Created WiFi-enablement of stock yards for invoicing and initiated EDI automation for e-invoicing

• Deployed consistent payroll in SAP and expanded footprint across locations and entities

• Completed the pilot project for GPS tracking of vehicles for sales from depots to customers

• Integrated LC module implemented in SAP for imports

• Rolled out the workflow enabled approval process in system with Maker/checker concept

• Rolled out the SAP at JSW Industrial Gases Pvt Ltd (JIGPL), i-Shop, RIPL, Integration of JSW-MI

Value-added implementations

• Implemented the bar coding system for physical stock and finished goods dispatches

• Implemented eNFA across the JSW Group, TQM Portal, Innovation Portal, Access Control and Attendance recoding system

• Automated the slag dispatch system to reduce truck turnaround time

• Introduced a solution for consolidation of Test Certificates/ addition of BIS Certified Logo across all products of Vijayanagar

• Integrated the township management system with SAP

• Launched the e-learning software for safety (scalable to many other areas)

• Introduced solution for iron ore blending and optimisation and coal-blending and optimisation

• Commissioned the IT-enabled online scarfing system

• Ferro-alloy swapping in the Steel Melt Shop Heat Tracking System

• Rolled out the GPS-based Hot metal Torpedo Ladle Tracking System

Priorities for FY 2017-18

• Adoption of GST rules in the Companys business systems and processes across all locations

• Introduction of Advanced Analytics, along with mobility first for workflows

• Implementation of MES system for Salem

Forward looking and cautionary statements

Certain statements in this release concerning our future growth prospects are forward looking statements, which involve a number of risks, and uncertainties that could cause actual results to differ materially from those in such forward looking statements. The risks and uncertainties relating to these statements include, but are not limited to, risks and uncertainties regarding fluctuations in earnings, our ability to manage growth, intense competition within Steel Industry including those factors which may affect our cost advantage, wage increases in India, our ability to attract and retain highly skilled professionals, time and cost overruns on fixed-price, fixed-time frame contracts, client concentration, restrictions on immigration, our ability to manage our internal operations, reduced demand for steel, our ability to successfully complete and integrate potential acquisitions, liability for damages on our service contracts, the success of the companies in which – has made strategic investments, withdrawal of fiscal Governmental incentives, political instability, legal restrictions on raising capital or acquiring companies outside India, unauthorised use of our intellectual property and general economic conditions affecting our industry. The Company does not undertake to update any forward-looking statements that may be made from time to time by or on behalf of the Company.

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