India's JSW Steel revamps acquisition strategy after recent setbacks
11 July 2018
India’s JSW Steel is looking to acquire smaller steel plants in India and overseas that produce specialized products, a top executive said on Tuesday, as it tweaks its acquisition strategy after missing out on some recent deals.
JSW Steel, India’s biggest steelmaker in terms of domestic capacity, failed to outbid rival Tata Steel (TISC.NS) in March for bankrupt steelmaker Bhushan Steel. The company also lost out to UK-based steel manufacturer Liberty House for Bhushan Power following a bankruptcy resolution process for both companies in April.
Earlier this year, JSW was beaten out by ArcelorMittal SA (MT.AS), the world’s largest steelmaker, for Italian steel major Ilva SpA.
After the recent setbacks, JSW Steel is now looking to focus on buying more niche, lower capacity plants which do not require huge investments to turn around, said Seshagiri Rao, joint managing director and the group financial head of JSW Steel.
“In the next round, our strategic thinking is to now focus on special product units that generally have a capacity of about a million tonnes,” said Rao, referring to an upcoming round of auctions under India’s new bankruptcy law, during which a second wave of steel assets will be up for grabs.
India’s steel demand has been growing at over 8 percent for the last few months. The growth is being led by higher motorcycle and automobile sales and government-sponsored infrastructure projects.
Rao said that JSW Steel is scouting for opportunities in the specialized steel segment that are dedicated to meeting specific customer demands. He did not name the prospective targets.
JSW has steelmaking capacity of 18 million tonnes per year, around 13 percent of India’s installed capacity. It is investing 268 billion rupees ($3.9 billion) over the next three years to expand to 24 million tonnes.
By 20230, JSW plans to increase its capacity to 40 million tonnes in India and 10 million tonnes overseas.
Buoyed by its two recent acquisitions of relatively smaller steel plants in the United States and Italy, the company is now looking for similar-sized plants elsewhere in Europe.
“There are five or six mainly downstream projects that we’re evaluating,” said Rao, adding the strategy would be similar to its acquisition plans in India.
In March, JSW bought Acero Junction Holdings for $80.85 million in the United States and Italy’s Aferpi for 55 million euros in May.
Together, along with its plate and pipe mill in the U.S., it now has a total overseas capacity of 4 million tonnes per year.
“I think both the acquisitions we’ve announced fit well with our strategy,” Rao said.