B4-1 Essay

Manjyot Singh Syan- 18A1HP052

Ankita Awasthi- 18A1HP068

Anurag Dasmohapatra- 18A1HP097

Rukhshar Jahan- 18A2HP442

Panchi Kalita- 18A1HP041

Pinak Paritosh Patro- 18A3HP649

Abhinav Dinesh Boria- 18A1HP005

Submitted to: Dr. DEBDUTTA K. PANDA

JINDAL STEEL WORKS

SWOT ANALYSIS

Strength

High growth prospects with a consistently increasing revenue.

Profit and loss account of JSW steel

  18-Mar 17-Mar 16-Mar 15-Mar 14-Mar 13-Mar 12-Mar

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Income              

Revenue from operations 65046 56244 40354.48 49657.51 48527.18 38763.41 34658.48

Service Tax/Other Levies 1259 4623 4152.04 4305.99 3997.71 3375.78 2598.01

Revenue from operations (Net) 63787 51621 36202.44 45351.52 44529.47 35387.63 32060.47

India’s third largest and world’s sixth largest steelmaker with a combined capacity of 18 MTPA.

(Annual Report 2017-18)

According to World Steel Dynamics, based on a variety of factors, the Company achieved the highest rating (10 out of 10) on the following criteria:

Conversion costs

Yields

Expanding capacity

Location in high-growth markets and labor costs

The Company reduced its net debt on consolidated basis by 3529 crores in FY18, while diversifying funding sources. These have created a strong financial profile and cash flows:

Strong Operating EBITDA margins of 21.

1%

Capex spend of 4,700 crores

Industry leading ROCE of 16%

JSW steel caters to the galvanized steel segment with the market share of 42%.

8600+ JSW exclusive and non-exclusive retail outlet to ensure availability and accessibility of logistics.

JSW colouron+ is the leading color coated brand in India.

Vijayanagar plant is one of the world’s most efficient and fastest growing steel production facilities in terms of conversion cost.

Located in Vijayanagar in Karnataka, Salem in Tamil Nadu, and Tarapur, Vasind, Kalmeshwar and Dolvi in Maharashtra and these locations are well connected to both Goa and Chennai Port.

The Company had 46 direct and indirect subsidiaries and 9 JVs as on 31 March 2018. There has been no material change the business of the subsidiaries.

During the year under review, the following 4 companies were formed as the subsidiaries of the company:

JSW Utkal Steel Limited

Creixent Special Steels Limited

Hasaud Steel Limited

Milloret Steel Limited

JSW is the first Indian company to use the Corex Technology to produce hot metal and started its integrated steel plant operation in 1999 at Vijayanagar plant.

Corex is a smelting-reduction process. It is developed by VAI, for environmentally friendly and cost-efficient production of hot metal from iron ore and low-grade coal.

Weakness

Companies Revenue ($ Billion) No. of Employees

Rashtriya Ispat Nigam Limited (RINL) 2 17617

Tata Steel 20 35000

JSW Steel 11 11103

SAIL 7.7 74719

Less Human Capital than other major companies.

The focus area for improvement is Waste Management. The company pursues the policy of three R’s – Recycle, Reduce and Reuse and many projects have been implemented for solid waste utilization. (Annual Report 2017-18)

Fitch Ratings downgraded JSW Steel to ‘BB’ from ‘BB+’, citing a decline in profitability and rise in leverage caused due to a prolonged period of weak international steel prices and debt-funded capacity expansion.

Opportunity

Expand overall steelmaking capacity from 18 MPTA to 24.7 MPTA by March 2020.

The IIM-A executive education programme focus to provide the opportunity of both professional and personal growth. It gives knowledge and insight to develop and expand breadth of perspective. (Annual Report 2017-18)

Development in R&D efforts:

Reduction in ferro-alloy cost by alternative alloying strategy for cost savings

Optimization of resource utilization

Recycling and reuse of process waste

Process optimization to reduce the carbon consumption by 2kg/T for cost savings

Development of a new hydraulic bound mixtures (HBM) using BF slag, LD slag and Lime resulted in reduction in civil project costs, lower carbon emissions, extensive use of slag leading to conservation of natural resources.

Process optimization to maximize iron bearing dust & sludge consumption in micro-palletization.

Optimization of QST technology for reduction in Mn & Si of lower diameter MT bars (<=25 mm) resulting in ferro-alloy cost saving of ` 210/MT at Dolvi plant.

Threats

JSW Steel has seen its market cap get sliced by close to a fourth in the space of a week following concerns about stoppage of iron ore supplies for its core steel operations and allegations in the Lokayukta report about irregularities in its procurement practices.

The Supreme Court’s decision to ban mining in the Bellary-Hospet region stoked fears over the company’s ability to sustain operations, given that at least 80 per cent of the company’s iron ore requirement is met from mines in Karnataka.

Tata Steel Ltd, JSW Steel Ltd and Steel Authority of India Ltd (Sail) etc. planned higher output, aided by Prime Minister Narendra Modi’s push for faster Indian economic growth. Some local buyers are turning to Russian alloy instead after the past year’s 47% plunge in the ruble against the dollar among the world’s steepest made the nation’s exports cheaper.

Major Competitors in the market like Tata Steel, SAIL, RINL etc.

Value Chain Analysis

Primary Activities:

Inbound Logistics

Key raw materials – Coal, iron ore, lime stone, dolomite, coke etc.

Outsourcing- Iron ore from third party through a mix of domestic purchases & imports. For Vijayanagar and Salem – Karnataka

Dolvi -Odisha & imports

The corrosion proof, colored sheets of JSW colouron are made using technologies from Japan, US and Italy.

JSW secures raw materials for sale on the global market and direct use at the facilities to protect the company from variation in raw material prices.

In-house beneficiation technology to upgrade low grade iron ore into high grade usable inputs.

About 80% of the raw materials transported via rail/sea.

Operations

In India, the major manufacturing plants of JSW are located Karnataka, Tamil Nadu and Maharashtra.

Quality Assurance- JSW Steel have end to end, cross functional quality assurance system which has become a true hallmark.

JSW’s Vijayanagar and Salem works successfully qualified TQM diagnosis in 2018.

Environment- Since, steel making process involves emission of CO2, the company ensures compliance with norms through selecting right technology, equipment & processes.

JSW has developed environment friendly, sustainable products for usage like high-strength, low carbon steel to make the vehicles light and to reduce carbon footprints.

In 2017, JSW was the first Indian Steel Co. to get an Environment Product Declaration for HR Steel strip in the line with ISO 14025.

Installation of Waste Heat Recovery System to reduce fossil fuel usage.

Manufacturing & other expenses 12504 crores

Power & Fuel Cost ores

Outbound Logistics

Salem is a major supplier to auto components. Located nearly 340kms from Chennai and 180km from Bengaluru, it is well connected through railways, highways and ports which facilitates transportation of raw material and finished products.

Dolvi is situated near the Arabian Sea coast, providing an easy access to port. This leads to cost reduction in logistics.

Therefore, 80% of the finished products are transported via rail/sea.

Railway Freight Reforms: In May 2016, the Government removed the differential railway freight for the transportation of iron ore and pellets for domestic use and exports. The reform gave the much-needed boost to iron ore exports. Such a move may not augur well for steel producers, as it does not differentiate between quality of products.

Marketing & Sales

Brand building strategies of JSW:

JSW Neo Steel- JSW Steel TMT bars, branded as JSW Neo Steel are superior quality bars which are manufactured through primary production to ensure quality and purity. Along with confirming to the Indian, British and Australian standards; it also meets the requirements of different customers by providing customized products and services.

List of projects using Neo Steel – Delhi, Jaipur, Hyderabad, Bangalore and Chennai Metro Rail, Jaypee’s Yamuna Expressway, Delhi and Mumbai International Airports and Power Projects to name a few.

JSW Colouron+ – JSW manufactures color coated sheets for steel roofing under the name JSW colouron. An ad campaign was started by the company to create awareness about the product functionalities as well as educate the customers to identify the authenticity of the product.

Differential pricing strategy is adopted by the company based on different locations.

Due to the higher premium prices of iron ore mines in Karnataka, JSW has reduced the imports from other states into Karnataka.

For example: If you want to consider 63% graded iron ore in the state of Odisha is Rs.1575 per tons, the base price of the similar graded iron ore mines in Karnataka is Rs.3050 per tons. This generates a differential price of Rs.1475.

Due to the differential pricing of iron ore mines, it has the same effect on the prices of the products in different states.

State wise Price

State Section 500 D price (Rs per piece)

Chhattisgarh 8 mm 272

Karnataka 8 mm 290

Odisha 8 mm 294

Maharashtra 8 mm 269

Segmentation Approach:

JSW Steel has 8600 exclusive & non-exclusive retail stores across 575 districts in India.

For end customers & SME’s – JSW Shoppe (Franchisee Model)

For B2B customers- Online platform called JSW Steel e-Mart.

Product Portfolio

JSW Neosteel 500 D Premium High strength TMT re-bars with the best UTS/YS ratio resulting in highly ductile performance of the bars

JSW Neosteel 550 D Super premium high strength and high ductility TMT re-bars

JSW Neosteel 600 D Ultra-premium & ultra-high strength TMT re-bars.

JSW Neosteel CRS High strength corrosion resistant TMT re-bars.

Service

JSW SHOPPE: It is a network of 400 stores managed by the channel partners on a franchisee model.

The technical know-how of using the top-notch steel products to use them for the right business is provided to the customers.

Financing and other processing facilities that offer value addition on products is also given to the customers at Job Shoppe.

JSW COLOURON:

JSW Colouron+ is an awareness campaign to identify genuine products as well as educate the customers about the functionalities of the product.

Support Activities

General Administration-

Safety & Security- Installation of 500 TPB Vapor Pressure Swing Absorption for increasing oxygen enrichment and ramp up hot metal production at blast furnace.

To improve safety practices in the shop floor, the company has entered into partnership with Global Consultants Dupont.

Investment in infrastructure- US$3.7trillion

Human Resource Management- JSW is a performance driven organization.

No. of Employees Training Hrs./Employee Employee Benefit Cost

11619 Employees 37 Training hrs./employee 1,260.00 crores

Recruitment – Direct sourcing model

-Recruitment agencies.

The company pay’s competitive remuneration to its people and keeps conducts studies to understand employee pay positioning in steel & related industries.

JSW has launched initiatives like flexible compensation, encouragement for participation in National Pension Scheme and retiree health insurance.

Adequate training & grooming their workforce for leadership responsibilities with specially designed courses from IIM-A & Cornell University, USA.

JSW “Springboard” is a gender diversity initiative launched for women leadership development.

Research, Technology, and systems development- During the year 2018, 5 patents were filed, one filed earlier was granted.

   Year   Mar 17  Mar 18 

Capital Expenditure   7.04 16

Recurring Expenditure 18.01 25

Total Expenditure   25.05 41

Procurement- Iron ore and Coal are the key raw material of steel production.

Backward Integration through strategic tie-ups and investment in new technologies.

JSW also relies on in-house beneficiation technology to upgrade low grade iron ore into high grade usable inputs.

Moitra coking coal block, acquired through an auction, has an extractable capacity of around 30MnT.

Company’s dependence on premium coking coal is minimized through its in-house and blend management system (use of low-grade coal in coke ovens).

JSW Steel plans to counter the increasing iron ore prices in Karnataka by reducing imports from there and procuring iron ore from the western coast of the country through slurry pipelines.

Investment Cost for the pipeline – 21,000 crores

References:

Strength- High growth and increasing revenue. (Online). Available from:

(Accessed: 31/01/19)

Strength- Corex. (Online). Available from: (Accessed: 31/01/19)

Weakness (Online). Available from:

31/01/19)

Threats(Online) Available from: (Accessed: 31/01/19)

Inbound logistics (Online). Available from: (Accessed :1/02/19)

(Accessed :1/02/19)

(Accessed :1/02/19)

Operations. (Online). Available from:

(Accessed :1/02/19)

Marketing, Sales & Services. (Online). Available from:

(Accessed :1/02/19)

(Accessed :1/02/19)

(Accessed :1/02/19)

(Accessed :1/02/19)

(Accessed :1/02/19)

:1/02/19)

General Administration and HRM. (Online). Available from:

(Accessed :1/02/19)

Research, Technology & Systems Development. (Online). Available from:

(Accessed: 1/02/19)

Procurement. (Online). Available from:

(Accessed: 1/02/19)

(Accessed :1/02/19)

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