Another year of record performance

It gives me immense pleasure to share with you JSW Steel’s record performance during the year under review, despite the second wave of the pandemic in India testing our collective resilience and threatening to derail the economic recovery. However, unlike the first wave, we did not have to shut down our plants. Domestic demand was impacted initially due to localised lockdowns, and we focused on exports to offset the impact during the second wave.

At the same time, when the nation faced severe shortage in medical-grade oxygen, we supported the government’s efforts by supplying liquid oxygen from our plants to health facilities, and also by setting up COVID care facilities near our plants. The successful rollout of the world’s largest vaccination drive in India saw a rapid improvement in sentiment in the second half of FY 2021-22, and we moved our focus back to the domestic market. Our capacity utilisation levels remained high at 89%, and we delivered record steel production. We continued our focus on value added and special products (VASP) in our portfolio mix, with 60% of our sales being VASP in FY 2021-22. We commissioned our 5 MTPA expansion at Dolvi during the year, which is the largest ever single phase expansion undertaken by the Indian steel industry, and comprises India’s largest blast furnace and steel melt shop. Commodity inflation impacted our cost structure, with coking coal prices reaching $670 per tonne FOB Australia in March 2022, and energy prices at elevated levels. While steel prices rose, we also focused on cost-efficiency initiatives to protect margins.

JSW Steel delivered its highest ever EBITDA of ₹39,007 crore and Net Profit of ₹20,938 crore. The board has proposed a record dividend of ₹17.35 per share, in line with our dividend policy.

Our balance sheet remains strong with robust cash flow generation, and the strongest credit metrics in several years. Our Net Debt-to-EBITDA, on a consolidated basis, stands at a comfortable 1.45x.

Subsidiaries and acquisitions start to deliver value

Our subsidiaries and recent acquisitions also recorded strong performance and turnaround. We successfully consolidated the Bhushan Power and Steel (BPSL) acquisition, which delivered exceptional performance, and generated strong EBITDA and cash flows. Our Joint Venture company, JSW Ispat Special Products, improved its performance, and we have announced a merger of the company with JSW Steel, subject to requisite approvals. Our US operations turned profitable during the year.

Advancing with steel, growing with India

Steel continues to be the essential material for newer urban constructions, mobility, and renewable energy infrastructure. Key players in the Indian and global steel industry are today focused on producing value-added steel products, made in the most efficient and responsible ways. The steel industry is poised to benefit from the global spend on infrastructure and the energy transition.

The World Steel Association is making notable strides in providing global leadership on all major strategic issues impacting the industry, particularly focusing on economic, environmental and social sustainability. I am honoured to serve as its Chairman, and I consider this to be an opportunity to contribute and collaborate with various stakeholders to create the market conditions necessary to transition to low-carbon steelmaking.

The future of the Indian steel industry is exciting with a steadily expanding domestic market. During FY 2021-22, Indian steel consumption grew to 106 MnT from the pre-pandemic level of 100 MnT. Demand is expected to grow at a healthy rate through the current decade. We view the export duties imposed on steel in May 2022 as a short-term headwind, since they have been imposed with the objective of controlling inflation. We continue to engage with the government on this matter and believe that the duties would be withdrawn once inflation moderates.

India is a cost-competitive exporter of steel, and has an opportunity to take on a larger role in the global steel trade. The Indian government continues to encourage manufacturing-led growth and merchandise exports from India. We are expanding our India capacity in a phased manner to 37 MTPA from 27 MTPA at present to tap the opportunities in the domestic as well as global markets.

The expansion of our Vijayanagar plant from 12 MTPA to 19.5 MTPA is underway, and capex cost is well below global benchmarks. BPSL is being expanded to 5 MTPA. BPSL has a strong presence in the eastern India market, and being located in Odisha, it enjoys the strategic advantage of proximity to iron ore mines. The Dolvi 5 MTPA expansion was commissioned in FY 2021-22, and will be highly cost competitive as it has the best-in-class technologies for higher efficiency.

Value-added products and responsible steel

We are further strengthening our business model by increasing capacity while reducing our environmental footprint. Our ongoing expansions are oriented towards producing steel with higher use of renewable power, best-in-class digitalisation to achieve operational efficiency and best available technologies (BAT) to reduce associated CO₂ emissions. We are consciously going beyond basic steel and are consistently maintaining the share of VASP in our product mix to over 50%.

Our thrust on R&D and product development has made us the largest and preferred supplier across categories, from Advanced High Strength Steel (AHSS) to meet safety and lightweight requirements in automotive and tinplate used in food packaging, to corrosion-resistant steel for white goods.

The energy transition has provided a significant opportunity for steel players, with huge investments being made in renewable power generation, and transmission & distribution infrastructure, all of which are steel-intensive. Our brand Galvos is used extensively in solar installations. We have also made significant inroads into electrical steels, which are used in various electrical devices such as transformers.

Digitalisation reaping substantial benefits

One of our top priorities has been the digitalisation of our operations, with the deployment of cutting-edge technology. At the outset, we had set specific goals to inculcate a ‘digital first’ organisational culture, enabled by systems, people and technology. We implemented Industry 4.0 in our manufacturing process to make our operations efficient, including automation, augmented and virtual reality, advanced robotics, IoT, AI and machine learning across 200+ lighthouse projects. These efforts have started bearing fruit, with increased cost efficiency, better turnaround times, optimised resource usage and enhanced safety performance.

Setting benchmarks in ESG performance

At JSW Steel, ESG is core to everything we do, and during FY 2021-22, we made significant progress towards our 17 focus areas. We retained our leadership rating of A- in the 2021 CDP Climate Change assessment, being the only company in India and Asia (ex-Japan) to achieve this feat in our category. We were also included in the S&P Dow Jones Sustainability Index for Emerging Markets and were named Sustainability Champion by World Steel Association for the fourth consecutive year. We became the first steel company in the world to issue a US dollar-denominated Sustainability Linked Bond (SLB). The $500 million SLB has a tenure of 10.5 years and is linked to our CO₂ reduction target. We have committed to reduce our CO₂ emissions intensity (Scope 1 and 2) by 42% by 2030, compared to the base year of 2005, aligned with India’s Nationally Determined Contribution (NDC).

We have earmarked ₹10,000 crore for investments to reduce our carbon emissions through various initiatives, such as increasing the use of renewable energy to replace thermal power, reduce our fuel rate through improved raw material quality via beneficiation, and deployment of Best Available Technologies (BAT). We have contracted for     ~1 GW of renewable energy, of which 225 MW became operational in April 2022, and the balance will come on stream in phases. Meanwhile, all our finished products underwent lifecycle analysis this year and received Environment Product Declaration through the International EPD System; this demonstrates our commitment to measuring and reducing the environmental impact of our products, and reporting these impacts in a transparent manner.

I am happy to share that JSW Steel was honoured with World Steel Association’s Steelie Award in the category of Excellence in Life Cycle Application. This recognition highlights our focus on product sustainability and encourages us to continue to drive more sustainable products. Our stewardship across areas of water and waste will continue, and we will maintain our focus on making circular economy a reality for all.

Our focus on overall people experience, and their health and safety remains steadfast. To this end, we continue to carry out regular engagements, training programmes, inspections and audits, and campaigns. Through the Contractor Assessment & Rating for Excellence in Safety (CARES) programme, we are also ensuring contractor safety. To make our commitment to greener operations more inclusive, we have unveiled an EV Policy for our employees, which is aimed at encouraging them to make sustainable mobility choices.

The JSW Foundation continued to positively impact the lives of millions. It’s a matter of great pride that the JSW Foundation is now a member of the United Nations Global Compact and is the first Indian foundation to receive ISO 26000:2010 conformance for contributing to social responsibility.

Our progress on ESG goals, and continued business outperformance are outcomes of the robust governance mechanism that we have established. Our Board, with credible and renowned members, plays a key role in guiding and progressing our ESG agenda. The Board’s diverse experience, collective intelligence and insights help us to think and act ahead of the curve, and deliver sustained stakeholder value. All our statutory Board Committees are chaired by Independent Directors, and the Audit Committee and Nomination & Remuneration Committee are fully independent.

Acknowledgements

I would like to take this opportunity to express my heartfelt condolences to the family of our Independent Board Member, Mr. Malay Mukherjee, who passed away earlier this year. Mr. Mukherjee’s counsel led by his unparalleled experience in building global level steel capabilities has significantly helped JSW Steel in its journey. It is with fond memories that we will remember him.

I would like to welcome Ms. Fiona Paulus to the board. With her global investment banking experience, focused on the resources and energy sectors, and leadership in the area of risk management, we look forward to her advice and counsel.

I also take this opportunity to thank all our stakeholders – the Central, State and local governments, our customers, investors, regulators, lenders, suppliers and advisors – for their continued support.

Finally, my sincere thanks to JSW Steel’s exceptionally talented and hardworking team, who are relentlessly pursuing our mission of being Better Everyday.

As we continue to dream bigger, challenge norms and do better, I look forward to your continued support.

Best regards,
Sajjan Jindal