JSW keen to push consolidation in value-added steel products
The steel company has bid for Asian Colour Coated Ispat, Vardhman Industries
JSW Steel wants to consolidate the working capital-strapped downstream or value-added steel products industry in the country through its bids for assets like Asian Colour Coated Ispat and Vardhman Industries.
Apart from showing keen interest in large steel companies like Bhushan Power and Steel and Monnet Ispat, the company has also kept an eye out for small assets that add value to primary steel products and earn at least 30% more in terms of margins against primary steel products like hot rolled coil.
"Most of the downstream (value-added) steel companies in India and internationally are facing a working capital crunch. While this is one market where demand is growing in double digits, from the supply side the sector is not growing. That is an area where we feel, because of our market penetration and by our ability to acquire assets, we will be able to consolidate much better," Jayant Acharya, director of commercial and marketing at JSW Steel, said adding that competition in that area is also moderate vis-a-vis other product areas.
Last month, its Rs 1,525 crore offer for stressed Asian Colour Coated Ispat received the lenders' nod and is awaiting the final approval from the NCLT. The company has a total of 1 million tonne of galvanised and colour-coated capacities in two locations in Maharashtra and Haryana, and will be a good fit for JSW Steel that is nearly tripling its colour-coated steel capacity to 2 million tonnes per annum over a year and a half. Acharya said demand for colour-coated steel is growing at about 16% per annum.
JSW Steel has also bid for Vardhman Industries that makes galvanised products. JSW Steel is the preferred bidder for the asset and has offered a total of Rs 63.50 crore to acquire it but the acquisition according to the company's terms is awaiting the nod of the Supreme Court.
On account of its own capacities, value-added and special products made for 53% of the company's total sales volumes in 2018. For Tata Steel too, beefing up value-added capacities is an important plank of its strategy. Both its acquisitions of Bhushan Steel and Usha Martin steel business will help the company widen its offerings in the special products space.