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JSW Steel¡¯s crore expansion plan to hit repayments-The 18th Guangzhou Die-casting, Foundry & Industry Furnace Exhibition
5/26/2017 Die-casting expo-foundry expo |
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Financial Express reported that JSW Steel¡¯s INR 26,800 crore capacity expansion plan over the next four years (2018-21), though seen as growth investments by analysts, is likely to stall the company¡¯s deleveraging program for the next three to four years. Analysts believe JSW Steel has the financials to take growth investments as they are also supported by favorable supply dynamics and a track record of timely execution. However, they may find it difficult to reduce their debt in the next three-four years despite increased cash flows.
Mr Abhishek Poddar research analyst at Kotak Institutional Equities said that ¡°We estimate a consolidated EBITDA of INR 13,500 crore, INR 14,000 crore and INR 14,500 crore for FY18, FY9 and FY20.¡±
The net debt at INR 41,500 crore in FY 2017, is seen rising to INR 41,800 crore in FY 2018 and to INR 41,400 crore in FY 2019. In FY17 the company reduced its debt by INR 2,800 crore from INR 45,400 crore.
Others believe though deleveraging may not be possible in the next few years when the expansion is underway, but it will once the expansion is through by 2021.
Edelweiss Securities in a report said though, the brownfield expansion will boost capacity and improve cash flow, the company may not be able to deleverage in the next few years. However, the brokerage upgraded JSW Steel¡¯s ratings to ¡°Accumulate¡± from ¡°Sell¡± on improved earnings and higher efficiency besides its expectations that cash flows will improve post completion of the entire capex plan by FY20.
According to an estimate by Motilal Oswal Securities, JSW Steel¡¯s free cash flow is expected to improve to INR 5,336 crore in FY18 from INR 3,111 crore in FY17.
JSW Steel plans to spend INR 15,000 crore as debt and INR 12,000 crore as internal accruals to double the plant capacity at Dolvi to 10 million tonne from 5 million tonne by March 2020; upgrade blast furnace (BF-3) to 4.5 million tonne and closure of BF-2 at Vijaynagar in next 20 months, expand the cold roll mill at Vijayanagar to 1.8 million tonne from 0.85 million tonne, modernise the Vasind-Tarapur plant, apart from mining and sustenance capex. The capacity expansion is planned keeping in mind the country¡¯s steel requirement in the coming years which is likely to overtake the expected supplies.
-The
18th Guangzhou Die-casting, Foundry & Industry Furnace Exhibition
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