JSPL to purchase strategic stake in Steel Exchange India

One of India’s largest steel manufacturers, Jindal Steel & Power (JSPL) is likely to buy a strategic stake in the Visakhapatnam-based Steel Exchange of India Limited (SEIL). SEIL has actively been on the lookout for investors and JSPL offers them a synergistic answer. SEIL has confirmed receiving official Expression of Interest (EOI) from JSPL. The size of this deal is not yet known due to discussions still being in the preliminary stages.

JSPL has persistently been scouting for opportunities to usher inorganic expansions in a largely fragmented industry with dispersed capacity. This will help augment output more than five-fold to 50 million tonnes. The best strategies in bringing this about have been identified as the purchase of share, or acquisition of a company if needed. 

Steel Exchange India Ltd (SEIL) is one of the largest TMT bars producers, and intends to scale up crude steel production to 1 million tonnes per annum (MTPA). This expansion can increase its EBITDA to Rs500-600 crores, which is 5 times the current number and help boost their ROI. 

In FY22, SEIL reported total operating revenues of Rs1,099 crore, 22% higher yoy. SEIL went through tumultuous times in FY18 and FY19 due to operating losses amidst lacklustre demands. This was coupled with rising prices, which led to under-absorption of overheads but this slowdown was mitigated by FY22, when profit margins stood at 10.59%.