Company sticks to its debt reduction initiative- Mr Naveen Jindal

Excerpts from an interview of Mr.Naveen Jindal, Chairman, Jindal Steel & Power Limited (JSPL) with ET Now on 5^th May 2020:

Update on the Indian Equity Market:

On Thursday Nifty closed -0.8% lower at 9,199. Among the sectoral indices FIN Services (-1.6%), FMCG (-1.4%) and Bank (-1.0%) closed lower. NIFTY PSU Bank (+0.1%), NIFTY Media (+0.1%) closed on a positive side. Bharti Infratel (7.1%), Indusind Bank (6.6%) and Adani ports (4.4%) closed on a positive note. NTPC (-4.3%), BPCL (-4.2%) and ONGC (-4.2%) were among the top losers.

• Jindal Steel & Power (JSPL) is looking for a strategic partner to offload part of its stake in its subsidiary in Oman, marking a significant shift from its earlier plan for an IPO as the Covid-19 pandemic impacts industries.
• The company plans to stick to its debt reduction initiative by reducing overall debt to Rs. 25,000 crore in two years.
• The pandemic has impacted functioning and production of steel industry, JSPL’s plants at Raigarh and Angul are fully operational since the start of the lockdown.
• As domestic demand is impacted, the company is looking for exports. The company is exporting 80% of production these days.
• The company is exporting steel to China, Malaysia, Europe, the USA, export order of rail blooms from France. In the domestic market the company had received supply orders from Rail Vikas Nigam for Kolkata Metro.
• Domestic steel demand has seen a major fall post-March, due to complete lockdown. Demand will pick up up before the monsoon season, post lockdown, as infrastructure projects and construction activities will resume.
• A stimulus is necessary and the government should frontload its $250 billion spending plan under the National Infrastructure Pipeline. The government should also announce a sizeable package to compensate loss of income suffered by Indian industry.
• JSPL is looking to raise money but not considering equity.
• On overseas front plants and mines are doing well for the company.
• The company had applied for a moratorium, like many other corporate.

Consensus Estimate: (Source: market screener and Investing.com websites)

• The closing price of JSPL was ₹ 90/- as of 7-May-2020.  It traded at -20.5x/-20.3x/11.7x the consensus earnings per share estimate of ₹ -4.39/-4.43/7.65 for FY20E/ FY21E/ FY22E respectively.
• The consensus average target price for JSPL is ₹179/- which implies a PE multiple of 23.3x on FY22E EPS of ₹7.65/-.

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