1 Analyst Meet Presentation Analyst Meet Presentation Q1 FY 2011 Q1 FY11
Agenda Key Developments Economic and Industry Scenario Operating Highlights Financial Performance Project Progress 2
Key Developments Strategic Collaboration with JFE Leapfrogs to 2 nd rank amongst 35 world class steelmakers Blooming Mill at Salem commissioned on July 19, 2010 3
4 JSW – JFE Partnership
Overview Game Changer for JSW � Access To Cutting Edge Technologies � Access To Fast-Growing Automotive Market � Lower Cost Of Production By Operational Excellence � Deleveraged Balance Sheet To Fuel Next Phase Of Growth At Over $1 bn, Transaction Is One Of The Largest � FDI In The Indian Metals And Mining Space � Japan-India Strategic Transactions � Preferential Allotments By An Indian Company 5
Strategic Intent India’s Largest Private Sector Steel World’s Fifth* Largest Steel Maker With Maker with 11 MTPA Capacity By FY2011 ~30 MTPA Capacity Achieved CAGR Of 39% (Last 5 Years) Operational Excellence With State-of-the- in Production Art Technology Aggressive Expansion Plans in India Presence in Fast-Growing Indian Market Optimize Capital Structure Future Growth through Equity Through Deleveraging Participation in India Technology For Operational Excellence Strategic Production Base In India for and Production Of Existing Automobile Customers Automotive Steel Products Value Creation for Both Partners * Source: World Steel Association – Based on 2009 production 6
Next Phase of Collaboration Strategic Collaboration Agreement - Nov 2009 Subscription Agreement Foreign Collaboration Agreement Automotive Technical Assistance Agreement Substrate Supply Agreement General Technical Assistance Agreement for Plant Performance Improvement Giant Leap Towards Global Leadership 7
Automotive Technology Agreements � Project Consultancy to Build Modern CRM2 Benefits to JSW � Access to Fast Growing Auto Market � Short Learning Curve � Application Engineering � Technology to � New Product Manufacture Substrate at Development Vijaynagar � Benchmarking and � Technology for Automotive Training of Personnel Steel in CRM-1 � Substrate from JFE Access To The Cutting Edge Technologies 8
General Technical Assistance Agreements Quality Improvement Productivity Improvement � Operational Yield Improvement Fuel Rate Reduction Excellence � Higher Energy Efficiency Maintenance Practices Productivity Standardization of Process Safety Practices � Lower Cost of Production Environment Management Training � Short learning Benchmarking Talent Sharing Curve Sustainable Business Operations 9
Investment Structure Initial Subscription Amount: ` ` 4800 crores Instrument 7 days prior to closing Determination Event ` 1,365 ` 1,365 CP>= ` CP < ` CP>= CP < Fully Convertible Debenture 18 Months Trigger Event Tranche I 32mn shares CP>= ` ` 1,365 CP < ` ` 1,365 CP>= CP < ` 1,500 @ ` Tranche II 1mn shares + 3 mn GDRs JFE holding JFE holding On maturity, 36mn Min. proceeds of ` ` 600 cr 14.99% 14.99% shares @ ` ` 1,331 Tranche III JFE holding JFE holding Up to 2mn shares on conversion of current o/s FCCBs into shares 14.99% ` 300 cr 14.99% Min. proceeds of ` Potential Equity Infusion ` ` 5700 crores * “CP” means Avg closing price in 2 consecutive weeks/10 days or closing price during 5 consecutive days 10
Terms of the Securities FCD: Terms � Tenure: 18 months Tranche I - � Compulsorily Convertible into equity shares on occurrence of the Trigger ` 4,800 Cr ` Event or maturity Further, JFE has option to convert at any time @ ` 1500/ share � � Interest of 4.5% pa payable in arrears on conversion date � Non-transferable and not listed Equity Shares and GDRs issued at Higher of ` 1500 per share/GDR or � 10% premium to SEBI floor price Tranche II - GDR Terms ` ` 600 Cr � Non Voting Rights, Non-transferable and not listed � Fungible into equity shares on conversion of Promoter Warrants Tranche III - � Equity shares issued on conversion of outstanding FCCBs into equity shares at higher of ` 1,500 per share or 10% premium to SEBI floor ` ` 300 Cr price Equity Infusion In Tranche II & III At Premium To SEBI Price With A Floor Price Of ` ` 1,500 11
Rights to JFE Nominee Director � Right to nominate JFE nominee on the Board of JSW Anti Dilution Right � Right to maintain upto14.99% share or prevailing shareholding, if shareholding falls below 14.99% � Price: Issuance Price /10% premium in case of issuance to promoters 12
Process and Timeline Jul 27 Aug 26 Aug 31 Sep 09 Board Approval & Announcement Shareholder s’ Approval Instrument Determination Closing – Settlement/Allotment 13
Leapfrogs to 2nd Position from 7th Earlier JSW achieved a 10 out of 10 rating on following parameters Posco � Conversion costs; Yields � Expanding capacity JSW Steel � Location in high growth markets 7.53 Nucor � Labor cost 7.30 SAIL 7.25 CSN NLMK 7.23 Global size and 7.23 TATA/Corus efficient operation Usiminas 7.16 Severstal 7.10 Gerdau 7.09 7.05 Source: WSD – Ranking of top 35 “World Class” Steelmakers as on June 2010. 7.01 14
15 Entering High - end Auto Forging Market Blooming Mill Phase-I commissioned
Global economic measures indicate continuing growth 8.0 6.8 6.3 6.0 6.0 5.1 4.7 4.6 4.2 4.0 3.9 4.0 3.1 2.6 2.5 2.5 2.3 % Growth 2.1 1.9 2.0 1.3 0.6 0.0 0.0 ‐ 0.6 Jan ‐ 09 Apr ‐ 09 Jul ‐ 09 Oct ‐ 09 Jan ‐ 10 Apr ‐ 10 Jul ‐ 10 2009 Actual Forecast Dates ‐ 2.0 ‐ 3.2 ‐ 4.0 World Adv. economies Emerging and developing economies Source: IMF Continuously Improving GDP Growth Forecasts for 2010 16
Indian Economy While lead indicators are strong… …WPI is an area of concern 180 Index, Jan 2009 = 100 125 Index, Jan 2009 = 100 170 Vehicle Sales Food 120 160 150 115 Overall 140 130 110 Non ‐ Food Credit Fuel 120 CLI 105 110 IIP 100 100 90 95 80 May'09 May'10 Jan'09 Feb'09 Mar'09 Apr'09 Jun'09 Jul'09 Aug'09 Sep'09 Oct'09 Nov'09 Dec'09 Jan'10 Feb'10 Mar'10 Apr'10 Jun'10 May ‐ 09 Dec ‐ 09 May ‐ 10 Jan ‐ 09 Feb ‐ 09 Mar ‐ 09 Apr ‐ 09 Jun ‐ 09 Jul ‐ 09 Aug ‐ 09 Sep ‐ 09 Oct ‐ 09 Nov ‐ 09 Jan ‐ 10 Feb ‐ 10 Mar ‐ 10 Apr ‐ 10 Source: CSO, Reuters, SIAM CLI: Composite Lead Index 17
Steel Trends Crude Steel Production (MnT) Chinese Steel (MnT) 140 6 India (RHS) 24% 13% 160.4 120 5 151.4 133.4 World 100 129.0 4 80 257% World ex. China 3 15.0 60 China 2 40 ‐ 34% 6.7 1 20 4.4 4.2 0 0 Production Consumption Import Export Jun' 10 Jan' 08 Apr' 08 Jul' 08 Oct' 08 Jan' 09 Apr' 09 Jul' 09 Oct' 09 Jan' 10 Apr' 10 Apr ‐ Jun' 09 Apr ‐ Jun' 10 Source: WSA 18
HRC Prices Touched yearly high at the quarter beginning but softened later on….. 900 800 781 752 678 700 671 USD/ton 657 600 573 500 463 426 400 424 300 Jan 09 Mar 09 May 09 Jul 09 Sep 09 Nov 09 Jan 10 Mar 10 May 10 Jul 10 N.America domestic FOB US Midwest mill Europe import CIF S.European port China domestic Shanghai (incl. 17% vat) Source: SBB 19
…. Impact partially redeemed by reducing raw material prices 250 600 237 Coking Coal 500 495 211 200 448 Coke 465 400 177 150 333 USD/ton USD/ton Scrap 300 100 124 Iron Ore 200 50 100 0 0 Jun 09 Jul 09 Aug 09 Oct 09 Nov 09 Dec 09 Jan 10 Feb 10 Mar 10 Apr 10 May 10 Jun 10 Jul 10 Sep 09 Indian Iron Ore 63% Fe dry / China import CFR N.China port Australian Spot HCC FOB Scrap / Shredded / Rotterdam export FOB (RHS) China Coke export FOB (RHS) Source: SBB, Deutsche Bank Research 20
Indian Steel Market: Demand continues to be strong Production Vs. Consumption (MnT) Import Vs. Export (MnT) 3.0 16.0 2.5 2.7 15.0 75% 14.9 12% 2.0 14.0 3% 1.5 13.0 13.3 13.3 1.5 12.9 1.0 ‐ 15% 12.0 0.7 11.0 0.5 0.6 10.0 0.0 Finished Steel Production Apparent Steel Import Export Consumption Apr ‐ Jun' 09 Apr ‐ Jun' 10 Apr ‐ Jun' 09 Apr ‐ Jun' 10 Source: JPC 21
Production – Q1 FY 11 26% YoY % 14% Q1'11, YoY % 1.50 Q1'10, 1.093 0.871 1.00 1.80 Q1'11, 1.574 0.50 1.60 Q1'10, 1.376 0.00 1.40 Rolled : Flat 1.20 1.00 71% 0.80 YoY % 0.60 Q1'11, 0.35 0.309 0.40 0.30 Q1'10, 0.25 0.20 0.181 0.20 0.15 0.00 0.10 Crude Steel 0.05 0.00 Rolled : Long All Numbers are in Mn Tonnes 22
Saleable Steel Sales – Q1 FY 11 ‐ 5% YoY % Q1'11, Q1'10, ‐ 10% 1.00 Q1 '10, 0.855 0.859 Q1 '11, 0.40 0.366 YoY % 0.346 0.80 Q1'10, 1.40 0.30 1.321 0.60 Q1'11, 1.191 0.40 0.20 1.20 0.20 0.10 0.00 1.00 0.00 Rolled : Flat Value Added (CR/GI/PPGI) 0.80 46% ‐ 66% 0.60 YoY % YoY % Q1 '11, Q1 '10, 0.25 0.350 0.225 0.40 0.311 Q1 '10, 0.300 0.20 0.154 0.250 0.20 0.15 0.200 Q1 '11, 0.10 0.150 0.00 0.107 Total Sales 0.100 0.05 0.050 0.00 0.000 Rolled : Long Semis All Numbers are in Mn Tonnes 23
24 Performance Financial
Financials – Q1 FY 11 (Standalone) ` Cr. Particulars Q1 FY 11 Q1 FY 10 Growth Net Sales 4,647 3,894 19% Op. EBITDA (excl. Fx Variance) 1,093 747 46% Op. EBITDA Margin (excl. Fx Variance) 23.6% 19.1% EBITDA 1,038 988 5% EBITDA Margin 22.2% 25.2% Less: Interest 214 221 ‐ 3% Less: Depreciation 317 272 17% Profit Before Tax 506 496 2% Profit after Tax 350 340 3% 25
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