JSW Steel’s move on fresh capacity addition with huge investments comes at a time when steel demand in the country has plunged and the economy is limping. Uncertainty over the plan to acquire Bhushan Power and Steel (BPSL) has added to its woes. In a recent interview with BusinessLine , Seshagiri Rao, Joint Managing Director, JSW Steel, expressed confidence that the company’s focus on value-added products will help it sail through the trough. Excerpts:
Is the arbitrary modification of your resolution plan for Bhushan Power by the NCLT a concern?
The issues raised by us with the NCLAT — seeking immunity from ongoing criminal investigation against the erstwhile promoter of BPSL and retaining the profit in the company during the insolvency period — are important not only for us but also for other successful bidders. It ensures that the resolution applicant gets a clean company to turn around. At present, the government agencies are raking up old claims and getting into litigation with successful bidders. Section 238 of the IBC says it has over-riding powers on all other laws. A similar provision is also there in the Prevention of Money Laundering Act. There is a lot of confusion due to the disconnect over which of these two laws prevails over the other. In spite of the NCLT approval of the resolution plan, there are certain litigations cropping up. Based on our past experience with Monnet Ispat, we have sought complete immunity on future cases.
You have already tied up Rs. 19,700 crore for the BPSL buyout. Is it leading to losses?
It is not just the loss due to paying out interest, but if a company locks up close to Rs. 20,000 crore, it has a huge impact on the company’s credit matrix. Though the money is not utilised, it becomes a drag on the financials. So, indirectly, the uncertainty has caused huge damage not only for JSW Steel but also for all successful resolution applicants.
Is the steel demand reviving following the government’s announcement of incentives to boost the economy?
Demand has slowed in the last few months. In August, the demand growth was 1.7 per cent against 7 per cent earlier. There is a sizeable slowdown across sectors. The government has announced a number of measures. What is really required is the credit flow, which is completely chocked from NBFCs, banks and mutual funds. This needs to be smoothed. There could be a debate on whether credit flow has stopped due to the liquidity issue or solvency issue but, in reality, credit is not flowing to corporates or end-users. Not only retail sales but even OEM (original equipment manufacturers) sales are affected severely because there has been a push-back from the consumption point of view.
What is the use of giving incentives to push exports when international demand itself is weak?
There are certain areas where India can score due to its competitive advantages. For instance, in textiles, Bangladesh, which is much smaller than India, exports $35 billion whereas India exports only $17 billion. India has several constrains such as the cascading impact of taxes which are not reimbursed, high interest rate and higher logistics cost.
Are you planning any production cut?
As on date there are no plans for production cuts. We are just watching the developments. Generally, the second half of the financial year is always good for the industry. We hope the government’s initiatives will revive the economy, besides the good monsoon boosting rural income leading to better demand. We will watch demand in the December quarter and take a call on production cuts.
via In spite of NCLT nod, litigations are cropping up: JSW chief – NEWS – The Hindu BusinessLine
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