is set to raise $1 billion (about Rs 7,300 crore) via an overseas bond sale as it is seeking to build capacity and lower fund costs with the local economy opening up fast following the vaccination drive.
The steelmaker has appointed investment bankers including Deutsche Bank, Standard Chartered, JP Morgan and BNP Paribas, three people aware of the development told ET.
JSW Steel declined to comment on the matter. Individual banks could not be contacted immediately.
The proposed bond sale is likely to open for subscription in the next two weeks in a single tranche or two tranches.
While the company aims to launch bonds compliant with sustainable development or ESG (environmental, social and governance), a portion of the targeted sum could well be vanilla dollar-denominated debt papers. An ESG tag helps cut borrowing costs as proceeds are used for a dedicated cause.
The bonds may have five, seven or 10-year maturity. Negotiations are going on, with final pricing contours being at an advanced stage.
“The proceeds of the bond sale are likely to be used for a combination of capacity expansion, mostly refinancing and other business purposes,” said one of the persons, who did not wish to be identified.
The company is currently in an expansion mode to reach about 38 million tonnes per annum (mtpa) of steel capacity by 2024, making it the largest steelmaker in the country, ahead of Tata Steel, which has a capacity of 33 mtpa currently, and SAIL (about 22 mtpa). “Today we are at 18 mtpa at JSW Steel, another 3 mt of Bhushan and 1 mt of Monnet,” said the company’s joint managing director Seshagiri Rao in an interaction in July.
“Another 5 mtpa at Dolvi gets completed in September of this year, and after that there is a 7.5 mtpa happening in Vijayanagar,” Rao said.
Besides, Bhushan Power & Steel is expanding from 3 mt to 5 mt and Mingo Junction operations in the US will reach 1.5 million tonnes, helping JSW Steel increase its capacity to expand to 38 mtpa by 2024, according to the managing director.
On May 19, Fitch Ratings had revised JSW Steel’s outlook to ‘positive’ from negative while retaining the rating grade at BB-, two notches down in the high-yield category.
Since then, the US Treasury benchmark yield has fallen about 130 basis points to 1.24%, with the US central bank hinting at no immediate unwinding of monetary largesse. This makes a case for Indian companies tapping into the overseas pools of liquidity. The overseas market offers greater magnitude than the local market.
The value of the world’s stock of negative-yielding debt has ballooned to more than $16.5 trillion, according to an estimate by the Financial Times.
JSW Steel spent Rs 2,688 crore on capital expenditure against a total planned spend of Rs 18,240 crore for this financial year. The company had earlier said that it was planning to invest another Rs 25,115 crore by 2024-25 to ramp up its capacity.
JSW Steel reported its highest-ever quarterly net profit of Rs 5,900 crore for the April-June period compared to a loss of Rs 554 crore a year ago.
The company’s net debt stands at Rs 55,000 crore, as of June 2021, and it has a cash balance of Rs 8,602 crore.