JSW Steel eyeing value-added acquisitions

Steel demand in Asia's third-largest economy has been growing at near-double-digits over the past few years, pushing local firms to boost capacity and attracting global steelmakers including ArcelorMittal and POSCO to set up base in the country.

JFE, the world's fifth-biggest steelmaker, last year bought 14.9 percent of JSW Steel for $1 billion, and has said it would look to further boost its stake in the company.

"Current agreement with JFE restricts their holding to 14.99 percent. They are interested in increasing holding, but we have not taken any call yet," Rao said.

RAW MATERIAL WOES

JSW currently operates its main Vijaynagar plant in Karnataka at two-thirds capacity due to acute shortage of iron ore after the Supreme Court put an interim ban on mining in the state. The company last month cut its production and sales forecast for the current fiscal year by 14 percent and 13 percent, respectively.

"We don't have a problem in selling our products. We are suffering from lack of ores," Rao said, adding the revised guidance could be met only if it continued to receive ore through auctions.

Given the lower production, JSW will cut its planned investments in capacity expansion to 40-50 billion rupees ($965 million) from the earlier planned 80 billion for this fiscal year ending March, he said. It has planned capex of 50 billion rupees for the next fiscal year.

The company, which hoped to start construction this year for a new 4.5 million tonne steel plant in West Bengal, expects this project to be delayed by a few months to the next fiscal year, Rao said.

The company is also scouting for coal assets in Australia, Africa, the United States and Canada, given its annual spending of $3 billion to source coal.

Rao denied any interest in a bid for Australian coal miner New Hope Corp, which last month put itself up for sale, and said no specific deal was on the table at present.

POWER SLOWDOWN

JSW, which holds majority stake in JSW Energy is planning to defer planned investments in the sector due to coal shortages and rising fuel costs that have hurt power generation in India in recent months.

The energy firm, which raised $583 million in a December 2009 IPO, had an initial target of setting up generation capacity of 11,000 MW by 2015, but is now uncertain on when this capacity will be achieved.

"We will do 11,000 MW but only caveat we have today is we want control on coal," Rao said. "Future expansions in the power sector, we would like to do only when we have coal tie-ups."

JSW Energy is currently operating power plants with 2,300 MW capacity, which it will raise to 3,100 MW by end FY12.

The group also plans to consolidate its overseas mining assets in Mozambique, Chile, South Africa and the United States, and list them in London, as and when they turn profitable, he said.

Shares in JSW Steel, valued by the market at $2.7 billion, ended down 6.9 percent in a weak Mumbai market. The stock has lost nearly half of its value in 2011 so far, compared to a 20 percent fall in the benchmark stock index.

($1 = 51.8 Rupees) (For summit blog: http://blogs.reuters.com/summits

(Additional reporting by Siddesh Mayenkar; Editing by Aradhana Aravindan)