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AnalystMeetPresentationQ1FY11
Analyst Meet PresentationQ1 FY 2011
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Economic and IndustryScenario
Operating Highlights
Financial Performance
Key Developments
Project Progress
Agenda
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Key Developments
Strategic Collaboration with JFE
Leapfrogs to 2nd
rank amongst 35 worldclass steelmakers
Blooming Mill at Salem commissionedon July 19, 2010
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JSW JFE Partnership
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Overview
Game Changer for JSW
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
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
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Indias Largest Private Sector SteelMaker with 11 MTPA Capacity By FY2011
Achieved CAGR Of 39% (Last 5 Years)in Production
Worlds Fifth* Largest Steel Maker With~30 MTPA Capacity
Operational Excellence With State-of-the-Art Technology
* Source: World Steel Association Based on 2009 production
Strategic Intent
Value Creation for Both Partners
Aggressive Expansion Plans in India
Optimize Capital StructureThrough Deleveraging
Technology For Operational Excellenceand Production Of
Automotive Steel Products
Strategic Production Base In India forExisting Automobile Customers
Presence in Fast-Growing Indian Market
Future Growth through EquityParticipation in India
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Strategic Collaboration Agreement - Nov 2009
Subscription Agreement
Foreign Collaboration Agreement
Automotive Technical Assistance Agreement
Substrate Supply Agreement
General Technical Assistance Agreement forPlant Performance Improvement
Next Phase of Collaboration
Giant Leap Towards Global Leadership
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Automotive Technology Agreements
Technology for AutomotiveSteel in CRM-1
Substrate from JFE
Technology toManufacture Substrate at
Vijaynagar
Project Consultancy to
Build Modern CRM2
Benefits to JSW Access to Fast Growing
Auto Market
Short Learning Curve
Application Engineering
New ProductDevelopment
Benchmarking and
Training of Personnel
Access To The Cutting Edge Technologies
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Safety Practices
Training
Talent Sharing
Maintenance Practices
Fuel Rate Reduction
Productivity Improvement
Standardization of Process
Environment Management
Benchmarking
Energy Efficiency
Yield Improvement
General TechnicalAssistance Agreements
Quality Improvement Operational
Excellence
Higher
Productivity
Lower Cost of
Production
Short learning
Curve
Sustainable Business Operations
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Initial Subscription Amount: ` 4800 crores
Investment Structure
CP>=CP>= ` 1,365
32mn shares
@ ` 1,500
Fully ConvertibleDebenture
Tranche I
1mn shares + 3 mn GDRsMin. proceeds of ` 600 cr
Tranche II
Tranche III
On maturity, 36mnshares @ ` 1,331
Up to 2mn shares on conversion of current o/s FCCBs into sharesMin. proceeds of ` 300 cr
JFE holdingJFE holding
14.99%14.99%
JFE holdingJFE holding
14.99%14.99%
InstrumentDetermination
Event
Trigger Event
* CPmeans Avg closing price in 2 consecutive weeks/10 days or closing price during 5 consecutive days
7 days prior to closing
18 Months
CP =CP>=`
1,365 CP
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FCD: Terms
Tenure: 18 months
Compulsorily Convertible into equity shares on occurrence of the TriggerEvent 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
Tranche I -` 4,800 Cr
Equity Shares and GDRs issued at Higher of `1500 per share/GDR or10% premium to SEBI floor price
GDR Terms
Non Voting Rights, Non-transferable and not listed
Fungible into equity shares on conversion of Promoter Warrants
Tranche II -` 600 Cr
Equity shares issued on conversion of outstanding FCCBs into equityshares at higher of `1,500 per share or 10% premium to SEBI floor
price
Tranche III -` 300 Cr
Equity Infusion In Tranche II & III At PremiumTo SEBI Price With A Floor Price Of ` 1,500
Terms of the Securities
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Right to nominate JFE nominee on the Board of JSW
Nominee Director
Right to maintain upto14.99% share or prevailingshareholding, if shareholding falls below 14.99%
Price: Issuance Price /10% premium in case ofissuance to promoters
Anti Dilution Right
Rights to JFE
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Jul 27 Aug 26 Sep 09Aug 31
Instrument Determination
Board Approval &Announcement
Closing Settlement/Allotment
Shareholder s Approval
Process and Timeline
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JSW achieved a 10 out of 10 rating onfollowing parameters
Conversion costs; Yields
Expanding capacity
Location in high growth markets
Labor cost
7.53
NLMK
NucorJSWSteel
Posco
Severstal
TATA/Corus
CSN
Usiminas
7.30
7.25
7.23
7.23
7.16
7.10
7.05
7.09
7.01
SAIL
Gerdau
Source: WSD Rankingoftop35WorldClass Steelmakers asonJune2010.
Global size andefficient operation
Leapfrogs to 2nd Position from 7th Earlier
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Blooming Mill Phase-I commissioned
Entering High - end Auto Forging Market
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0.6
1.9
2.5
3.1
3.94.2
4.6
3.2
0.0
0.6
1.3
2.1 2.32.62.5
4.0
4.7 5.1
6.06.3
6.8
4.0
2.0
0.0
2.0
4.0
6.0
8.0
Jan09 Apr09 Jul09 Oct09 Jan10 Apr10 Jul10
%Growth
World Adv.economies Emerginganddevelopingeconomies
2009
Actual ForecastDates
Source:IMF
Global economic measures indicatecontinuing growth
Continuously Improving GDP Growth Forecasts for 2010
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While lead indicators are strong
80
90
100
110
120
130
140
150
160
170
180
Jan
09
Feb
09
Mar09
Apr09
May
09
Jun
09
Jul09
Aug
09
Sep
09
Oct09
Nov
09
Dec
09
Jan
10
Feb
10
Mar10
Apr10
May
10
CLI
IIP
VehicleSales
NonFoodCredit
Index, Jan 2009 = 100
Source:CSO,Reuters,SIAMCLI: Composite Lead Index
95
100
105
110
115
120
125
Jan'09
Feb'09
Mar'09
Apr'09
May'09
Jun'09
Jul'09
Aug'09
Sep'09
Oct'09
Nov'09
Dec'09
Jan'10
Feb'10
Mar'10
Apr'10
May'10
Jun'10
Food
Overall
Fuel
Index, Jan 2009 = 100
Indian Economy
WPI is an area of concern
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4.4
15.0
6.7
4.2
Import Export
34%
257%
129.0
133.4
160.4
151.4
Production Consumption
24%13%
Source:WSA
0
1
2
3
4
5
6
0
20
40
60
80
100
120
140
Jan'08
Apr'08
Jul'08
Oct'08
Jan'09
Apr'09
Jul'09
Oct'09
Jan'10
Apr'10
India(RHS)
World
Worldex.
China
China
Jun'10
Apr Jun'09 Apr Jun'10
Steel Trends
Crude Steel Production (MnT) Chinese Steel (MnT)
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Source:SBB
300
400
500
600
700
800
900
Jan09 Mar09 May09 Jul09 Sep09 Nov09 Jan10 Mar10 May10 Jul10
USD/t
on
N.AmericadomesticFOBUSMidwestmill EuropeimportCIFS.Europeanport ChinadomesticShanghai(incl.17%vat)
678
671
752
781
426424
463
657
573
HRC Prices
Touched yearly high at the quarter beginning but softened later on..
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0
100
200
300
400
500
600
0
50
100
150
200
250
Jun09
Jul09
Aug09
Sep09
Oct09
Nov09
Dec09
Jan10
Feb10
Mar10
Apr10
May10
Jun10
Jul10
USD
/ton
USD
/ton
IndianIronOre63%Fedry/ChinaimportCFRN.Chinaport AustralianSpotHCCFOB
Scrap/Shredded
/Rotterdam
export
FOB
(RHS) China
Coke
export
FOB
(RHS)
IronOre
Coke
Scrap
CokingCoal
177
124
448
333
237
211495
465
Source:SBB, DeutscheBankResearch
. Impact partially redeemedby reducing raw material prices
Indian Steel Market:
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1.5
0.7
2.7
0.6
0.0
0.5
1.0
1.5
2.0
2.5
3.0
Import Export
AprJun'09 Apr Jun'10
75%
15%
Source:JPC
12.9
13.313.3
14.9
10.0
11.0
12.0
13.0
14.0
15.0
16.0
FinishedSteelProduction ApparentSteel
Consumption
AprJun'09 Apr Jun'10
3%
12%
Indian Steel Market:Demand continues to be strong
Production Vs. Consumption (MnT) Import Vs. Export (MnT)
Q
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Q1'10,1.376
Q1'11,1.574
0.000.200.400.600.801.001.201.401.601.80
CrudeSteel
YoY%
14%
Q1'10,0.871
Q1'11,
1.093
0.00
0.50
1.00
1.50
Rolled:Flat
YoY%
26%
Q1'10,
0.181
Q1'11,
0.309
0.00
0.05
0.10
0.15
0.20
0.25
0.30
0.35
Rolled:Long
YoY%
71%
Production Q1 FY 11
AllNumbersareinMnTonnes
S l bl S l S l Q1 FY 11
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Q1'10,
0.154
Q1'11,
0.225
0.00
0.05
0.10
0.15
0.20
0.25
Q1'10,
1.321Q1'11,
1.191
0.00
0.20
0.40
0.60
0.80
1.00
1.20
1.40
TotalSales
YoY%
10%Q1'10,0.855
Q1'11,0.859
0.000.200.400.600.801.00
Rolled:Flat
Q1'10,0.311
Q1'11,0.107
0.000
0.050
0.100
0.150
0.200
0.250
0.300
0.350
Semis
YoY%
66%
Q1'10,
0.366Q1'11,
0.346
0.00
0.10
0.20
0.30
0.40
ValueAdded(CR/GI/PPGI)
YoY%
5%
Rolled:Long
YoY%
46%
AllNumbersareinMnTonnes
Saleable Steel Sales Q1 FY 11
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Performance
Financial
Fi i l Q1 FY 11 (St d l )
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Particulars Q1FY11 Q1FY10 Growth
NetSales 4,647 3,894 19%
Op.EBITDA (excl.Fx Variance) 1,093 747 46%
Op.EBITDAMargin(excl.FxVariance) 23.6% 19.1%
EBITDA 1,038 988 5%
EBITDAMargin 22.2% 25.2%
Less:Interest 214 221 3%
Less:Depreciation 317 272 17%
ProfitBeforeTax 506 496 2%
ProfitafterTax 350 340 3%
` Cr.
Financials Q1 FY 11 (Standalone)
EBITDA MOVEMENT Q1 FY 11
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` Cr.
988
(71)
(550)
871
8548
(333)
1038
EBITDA Q1'10 Volume Cost NSR Mix impact CER/Others FX Impact EBITDA Q1'11
EBITDA MOVEMENT Q1 FY 11
Operational & Financial Performance USA
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PRODUCTION(NT) Q1FY11 Q1FY10 Growth
PlateMill 38,408 27,727 39%
PipeMill 12,033 5,432 120%
SALES(NT) Q1FY11 Q1FY10 Growth
PlateMill 34,986 14,376 143%
PipeMill 12,927 4,308 200%
Particulars Q1 FY11 Q1 FY10
Turnover 42.59 17.97
EBITDA+OtherIncome 7.94 (13.74)
ProfitAfterTax (7.36) (19.92)
USDMn
Operational & Financial Performance - USA
Consolidated Financials Q1 FY 11
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Particulars Q1FY11 Q1FY10 Growth
TotalIncome 4,858
4,014
21%
EBITDA 1,082 928 17%
Less:Interest 273 298 8%
Less:Depreciation 361 317 14%
ProfitBeforeTax 447 313 43%
ProfitAfterTax 295 234 26%
` Cr.
Consolidated Financials Q1 FY 11
Long term Debt Movement Consolidated
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1414314606800
(484)
224
(77)
NetLTDebtason
Mar'10
NewLoanTaken Repayments FxVariance Movementin
FD/MF
NetLTDebtason
Jun'10
` Cr.
Long term Debt Movement - Consolidated
Working Capital loan - ` 2,837 Crs.Cash and Cash equivalent - ` 926 Crs.
FD/Mutual Fund ` 246 Crs.
Financial Ratios
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*Not
Annualized
Financial Ratios
Particulars Q1FY11 Q1FY10
Op.EBITDAMargin(excl.Fx Variance) 23.6% 19.1%
PATMargin 7.5% 8.7%
DilutedEPS(`) 18.12* 17.72*ROCE 11.80% 13.72%
Particulars 30.06.2010 31.03.2010
NetL.T.Debt/Equity(x) 1.02 1.07
NetL.T.Debt/EBITDA(x) 2.31 2.36
NetL.T.Debt/Equity Consolidated(x) 1.41 1.49
NetL.T.Debt/EBITDA Consolidated(x) 3.19 3.38
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Progress
Project
BENEFICIATION PLANT
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As on Mar 10 As on June 10
BENEFICIATION PLANT
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BLAST FURNACE
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As on June 10As on Mar 10
BLAST FURNACE
SMS (Phase II)
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As on Mar 10 As on June 10
SMS (Phase II)
Q & A Session
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Q & A Session
Forward Looking and Cautionary Statement
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Certain statements in this report concerning ourfuturegrowthprospects areforward looking
statements,which involveanumberofrisks,anduncertaintiesthatcouldcauseactualresultsto
differ
materiallyfrom
those
in
such
forward
looking
statements. The
risk
and
uncertainties
relating to these statements include, but are not limited to risks and uncertainties regarding
fluctuations inearnings,ourabilitytomanagegrowth, intensecompetitionwithinSteel industry
includingthosefactorswhichmayaffectourcostadvantage,wageincreasesinIndia,ourabilityto
attract and retain highly skilledprofessionals, time and cost overruns onfixed-price,fixed-time
framecontracts,
our
ability
to
commission
mines
within
contemplated
time
and
costs,
our
ability
to
raisethefinancewithintimeandcostclientconcentration,restrictionsonimmigration,ourability
tomanageourinternaloperations,reduceddemandforsteel,our abilitytosuccessfullycomplete
andintegratepotentialacquisitions,liabilityfordamagesonourservicecontracts,thesuccessof
the companies in which the Company has made strategic investments, withdrawal of
fiscal/governmental incentives, impact of regulatory measures, political instability, legal
restrictions
on
raising
capital
or
acquiring
companies
outside
India,
unauthorized
use
of
our
intellectualproperty andgeneraleconomicconditionsaffecting our industry.Thecompanydoes
notundertaketoupdateanyforwardlookingstatementsthatmaybemadefromtimetotimeby
oronbehalfofthecompany.
Forward Looking and Cautionary Statement
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Thank you