Jindal Stainless can be one of the top companies in sector globally post expansion: Abhyuday Jindal

Pegged to be the metal for nation-building, stainless steel is being increasingly used in architecture, building and construction activities, automobiles, railways and transport in India and globally. Yet, the recently imposed export duty of 15 per cent on steel is dampening the business operability. 
Abhyuday Jindal, Managing Director, Jindal Stainless, in an exclusive conversation with BT’s Nidhi Singal talks about the company’s strategy, its upcoming merger, expansion plans, and much more. Edited experts:
 
BT: Jindal Stainless reported an 8 per cent year-on-year growth in its consolidated profit for the April-June quarter, despite rising input costs and export duties. What was the strategy that worked for the company?

Abhyuday Jindal: The last quarter was actually quite a challenging quarter because there were two-three external factors that are coming into effect now. First, the commodity cycle was on a downward trend. All your raw material prices were falling. So when that starts, the whole economy, and the world, go into kind of destocking mode. There is pressure to sell volumes, there is pressure on margins.
At this time, our government came up with this 15 per cent export duty. So, it is actually a double whammy for companies like us. Prices any way were coming down, plus with this export duty coming, it became unviable or very challenging for Indian companies to export.  Companies like us, where there is not so much demand in stainless steel (that we are trying to create), we were dependent on the export market.
There are certain sizes that we have or certain equipment we created, which are created only for the export segment. That was a big negative impact on us because of that kind of volume we then had to push to domestic. 
One positive thing for our company is that we are very agile. We are not dependent on any industry or any segment more than 15-20 per cent. Just to give an example, last two years, the auto was severely impacted because of semiconductors. And auto is a big sector for us, but our volumes were not impacted at all because whatever shortfall was in auto, we were very easily able to push that into other sectors. (As) railway picked up, so we pushed it into railways. 

The infrastructure segment has picked up with all the support coming from the government. The same thing we are doing now is that with this export duty coming on, we are not able to export the volumes that we were (doing earlier). So, we have pushed our volumes into the sector in that we were not very aggressive. We were leaving that more for the Indian secondary stainless steel players and the smaller company.  But with the export market not available to us, we have entered into this segment. There was a little dip as compared to Q4 last year, but overall we were able to maintain the volumes. Margins are definitely impacted by this export duty coming in because everybody is then buying only for the domestic market. And I think that was the impact the government wanted, which has been created. So, we are hopeful that next couple of months, they should do away with this export duty. 
The other factor is that now steel players can add boron, which classifies them as alloy steel, and then they are able to export without export duties. But in stainless steel, that is not possible.
We are into process industries also:  petrochemical, nuclear, auto, and railways. Architecture Building Constructions (ABC) is a massive area where stainless steel is consumed, and the world showcases that. And anywhere you see stainless steel is the material that is consumed in infrastructure to a maximum. So, in the same way, India is also leading up to that. A lot of interesting areas, like railway foot-over bridges, are now completely into stainless steel. In all coastal areas, they are supposed to be made of stainless steel. So that way, we are able to manage our Q1 performance.

BT: What percentage of your business was coming from domestic and export?
AJ: To serve domestic customers in one passion and export in a strategic manner aligned with the ‘local to global vision. 
Pre-pandemic, our export share has been 20-25 per cent. During the pandemic, it increased to about 30 per cent. However, post exports duty imposition it is low at 10 per cent only.  When this export duty goes down, we hope to take up our export percentage (back) higher again.
 
BT: When you divert your production to other sectors, how easy or difficult is it to switch manufacturing?
 
AJ:  There are standard grades, and there are customised grades. And when we say we can switch, we can switch in the series also. Last full year, the 300 series was the major series for us. Almost 50 to 60 per cent of our sales were in the 300 series. That was also because the export market is more on the 300 series. So then, because export was high, the 300 series was high. Now that export duties have (been) put in, the 300 series has come down by about 10 to 15 per cent. But we’ve picked up 400 series and 200 series, which go into other sectors and segments. So that way, we are able to move very fast into other industries and streams.
(The switch can happen) within, I would say, 20 to 25 days. We can very easily switch because it is purely (about) getting the required raw material. Nothing else needs to be done. If the raw material is with us, we can switch instantly. But if raw material has to be organised, then it can take about 20-25 days. The equipment, processing techniques – everything is the same. It is only the grade that we need to switch.
 
BT: How will the merger with Jindal Stainless (Hisar) Ltd impact your operations?
 
AJ: Jindal Stainless (Hisar) Ltd. was demerged in 2014. The reason was that we were in corporate debt restructuring. Along with our committee of bankers and our team internally, one way to protect our organization was decided. We had two factories, one in Hisar, and one in Orissa. Splitting them into two listed companies was a good option. 
Hisar, in the history of the Jindal Group, has never been at loss. For almost 50 years, Hisar has continuously been making profits. However, at that time, the stainless steel industry went through a very tough time. The point of view was that let us protect one company during those trying times.
Today, the biggest reason that the domestic stainless steel industry is suffering is unwarranted imports — heavy dumping that happens from China and Indonesia. Over the course of the last 10 years, due to excessive dumping, the whole industry and our margins and volumes were always under pressure. In 2014-15, the companies decided to split.
(Today) I would say we are the only company in the whole manufacturing sector that successfully did the splitting of companies and successfully got out of CDR. 2019 is when we completely paid all the debt, did not take any haircuts, and got out of CDR. Over the last couple of years, we have reduced our debt significantly, and our ratios are now one of the best in the metal sector. So now we felt it was the right time to remerge the companies.
 
This was also from the perspective of having one standalone entity that is a global major in stainless steel. After the merger, we will be among the top 10 stainless steel producers in the world. And after our expansion, which will start in January of this financial year, we aim to be in the top 5 in the world.
 
The merger will have a lot of benefits, including an improved balance sheet and stakeholder benefits. Our negotiating power will increase because rather than negotiating with our vendors and suppliers as two separate entities, we will now negotiate as one. It will also help in improving our customer service. Our investors will benefit too. There was always confusion in the market – what does Hisar do, or what does Jajpur (Orissa) do? Because of having two legal entities, we had to make a lot of double investments – warehousing, logistics, etc. Now, we’d be able to do away with all this.
 
BT: Where does India stand in the stainless steel ecosystem globally?
 
AJ: Till last year, we were actually number two in terms of production in stainless steel. China is number one, always, and then India was number two. Then certain factors happened – anti-dumping duty and CVD on stainless steel for imports coming in from China and Indonesia were removed. As soon as that got removed, Indonesia picked up its production and now has overtaken India as number two in terms of the stainless steel ecosystem. 
So it’s China number one, India used to be number two last year, and then Indonesia.  Now it’s China, Indonesia, and India.  So because of the government policies and because of the factors that have impacted us, India’s position is falling, which is a very big negative, I can say it from the government’s point of view.
 
BT: So aren’t the new export duties going to further damage India’s position in the stainless steel leatherboard?
AJ: Definitely, because now everybody, after the two years and the momentum that we saw in the industrial activity, every company has announced expansion, adding capacities and making India further strengthen its position. But with this duty and depending on how long it will continue, everybody is now either questioning that expansion or delaying it further. I mean everything is under question because of this export duty. We do feel that it should not stay for long, but all our plans are under, I would say, fix right now.
 
BT: But on the other side, isn’t the government really pushing every sector with the PLI?
AJ: The government is reworking the steel PLI. Nobody has been able to really apply or get anything from the steel PLI. The focus for PLI has been importing substitution, but I feel that the interaction with the industry requires being more robust. That is reason, why they are reworking on it, because every company from the steel industry represented that there is nothing in this that we can actually apply for or we can actually go and get this PLI for us. This is why, from the information that I’m getting now, they are reworking it and coming out with a new PLI for the steel industry.
 
BT: Stainless steel is created using scrap. So, where do you source your raw material from?
AJ: Stainless steel is the most sustainable material because it is 100 per cent recyclable and contributes to a circular economy. We use more than 85 per cent of scrap in one production. For this reason, we are completely focused on scrap (which is also a global phenomenon).
We source our scrap from all over. It is mainly domestic and nearby countries. South East Asia, Middle-East, and India contribute to 70-75 per cent of our scrap consumption. The remaining 20-25 per cent comes from the US and Europe.
 
BT: How much of it is coming from India? And do you see this growing?
AJ: India, you can say, is almost 45 per cent.  And yes, especially with government – the kinds of policies that they coming out with are helping and supporting this. Now they are coming up with the National Scrap Recycling policy, which will definitely help in terms of getting more scrap available to the Indian ecosystem.
 
BT: Even though you don’t use coke for melting, your process of sourcing the scrap (raw material) is heavy on carbon emissions. What initiatives have you taken to reduce your carbon footprint?
AJ: Manufacturing through the scrap route is relatively low on carbon emission.
We (have) already announced that we are not going to be investing in any more thermal power plants. We are setting up and investing in almost 300 megawatts of renewable capacity in Odisha, Harayana, and Rajasthan. We are also going to commission a green hydrogen project in Hisar that will enable the company to reduce its carbon dioxide emissions by nearly 2,700 metric tonnes per annum.
We have also looped in EY India for charting out a dynamic plan to achieve our ESG and decarbonisation goals.
For all our expansion, we require a lot of energy that will all be met through renewable sources.