Mumbai: The Sajjan Jindal-led JSW Steel is not going to jump the gun on its buying interest in troubled Tata Steel's British assets, saying talks are at an exploratory stage only, and it will be cautious in taking a call.
"JSW is an aspirational group. The deal talks are only at an exploratory stage. We are exploring the opportunities.
We will keep in mind our financial ratios before going ahead," JSW Group Chief Financial Officer Seshagiri Rao said.
He, however, added that the company has a strong balance sheet.
Last week, JSW Steel in a statement said it was evaluating some British steel assets, but did not name any specific target.
"As part of our growth strategy, we evaluate several opportunities, including the current opportunity of UK steel facilities," JSW had said in an exchange filing.
The Tatas, suffering from heavy losses for the past many years, had on March 29 announced its plans to sell its entire British steel operations in parts or full. The group has been hit by cheap Chinese imports, soaring costs and weak demand in the continent in particular and across the Western world in general.
Also read: Sajjan Jindal’s JSW in race to buy Tata Steel’s UK plants
JSW Group, with interests in steel, power, cement and ports, had a net debt of Rs 38,461 crore as of March 2016. It is interesting to see how the deal pans out as global demand for steel is expected to remain sluggish.
Global economy is still not out of the woods and IMF has again revised downwards its economic projections for global growth in 2016 to 3.2 per cent, saying economic activities across major regions/countries remain subdued despite sustained monetary easing.
The company feels that a pick-up in global activity will be more gradual as downside risks to growth have increased because of factors like a persistent deflationary environment, political uncertainty in the EU and the risk of Brexit, lack of confidence in sustainability of commodity prices and volatile capital flows and currencies.
According to the World Steel Association forecast, Chinese steel demand will drop by 4 per cent in 2016, leading to a 0.8 per cent decline in global steel demand. The global steel industry continues to face headwinds due to weak demand and overcapacity.
The worrying trend is Chinese steel production as well as exports have surged in recent months. The recent spike in steel prices, though these have come off from recent peaks, was mainly due to a thrust on stimulus and tightness in physical markets in China as well as broad-basing of trade remedial measures across other countries, JSW said.
In the domestic market, JSW Steel has added 2 mt each capacity at Vijaynagar and Dolvi units. Its installed capacity has now increased by about 25 per cent to 18 million tonnes per annum with completion of these low-cost and returns-accretive projects.
