Analyst Meet Presentation Q1 FY 2011 Q1 FY11 Agenda Key - - PDF document

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Analyst Meet Presentation Q1 FY11

Analyst Meet Presentation Q1 FY 2011

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Economic and Industry Scenario 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 world class steelmakers Blooming Mill at Salem commissioned

• n 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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India’s Largest Private Sector Steel Maker with 11 MTPA Capacity By FY2011 Achieved CAGR Of 39% (Last 5 Years) in Production World’s 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 Structure Through Deleveraging Technology For Operational Excellence and Production Of Automotive Steel Products Strategic Production Base In India for Existing Automobile Customers Presence in Fast-Growing Indian Market Future Growth through Equity Participation 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 for Plant Performance Improvement

Next Phase of Collaboration

Giant Leap Towards Global Leadership

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Automotive Technology Agreements

Technology for Automotive Steel in CRM-1 Substrate from JFE Technology to Manufacture Substrate at Vijaynagar Project Consultancy to Build Modern CRM2

Benefits to JSW

Access to Fast Growing Auto Market Short Learning Curve Application Engineering New Product Development 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 Technical Assistance 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 Convertible Debenture

Tranche I

1mn shares + 3 mn GDRs

• Min. proceeds of `

` 600 cr

Tranche II Tranche III

On maturity, 36mn shares @ ` ` 1,331 Up to 2mn shares on conversion of current o/s FCCBs into shares

• Min. proceeds of `

` 300 cr

JFE holding JFE holding 14.99% 14.99% JFE holding JFE holding 14.99% 14.99% Instrument Determination Event Trigger Event

* “CP” means 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>= CP>= ` ` 1,365 CP < CP < ` ` 1,365

Potential Equity Infusion ` ` 5700 crores

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FCD: Terms

• Tenure: 18 months
• Compulsorily Convertible into equity shares on occurrence of the Trigger

Event 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 or

10% 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 equity

shares 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 Premium To 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 prevailing shareholding, if shareholding falls below 14.99% Price: Issuance Price /10% premium in case of issuance to promoters Anti Dilution Right

Rights to JFE

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Jul 27 Aug 26 Sep 09 Aug 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 on following parameters Conversion costs; Yields Expanding capacity Location in high growth markets Labor cost

7.53

NLMK Nucor JSW Steel 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 – Ranking of top 35 “World Class” Steelmakers as on June 2010. Global size and efficient operation

Leapfrogs to 2nd Position from 7th Earlier

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Blooming Mill Phase-I commissioned

Entering High - end Auto Forging Market

16 ‐0.6 1.9 2.5 3.1 3.9 4.2 4.6 ‐3.2 0.0 0.6 1.3 2.1 2.3 2.6 2.5 4.0 4.7 5.1 6.0 6.3 6.8 ‐4.0 ‐2.0 0.0 2.0 4.0 6.0 8.0 Jan‐09 Apr‐09 Jul‐09 Oct‐09 Jan‐10 Apr‐10 Jul‐10 % Growth

World

• Adv. economies

Emerging and developing economies

2009 Actual Forecast Dates Source: IMF

Global economic measures indicate continuing 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 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 CLI IIP Vehicle Sales Non‐Food Credit

Index, Jan 2009 = 100 Source: CSO, Reuters, SIAM

CLI: 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 1 2 3 4 5 6 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 World ex. China China

Jun' 10 Apr ‐Jun' 09 Apr ‐ Jun' 10

Steel Trends

Crude Steel Production (MnT) Chinese Steel (MnT)

19 Source: SBB 300 400 500 600 700 800 900 Jan 09 Mar 09 May 09 Jul 09 Sep 09 Nov 09 Jan 10 Mar 10 May 10 Jul 10 USD/ton

N.America domestic FOB US Midwest mill Europe import CIF S.European port China domestic Shanghai (incl. 17% vat)

678 671 752 781 426 424 463 657 573

HRC Prices

Touched yearly high at the quarter beginning but softened later on…..

20 100 200 300 400 500 600 50 100 150 200 250 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 Jul 10 USD/ton USD/ton

Indian Iron Ore 63% Fe dry / China import CFR N.China port Australian Spot HCC FOB Scrap / Shredded / Rotterdam export FOB (RHS) China Coke export FOB (RHS)

Iron Ore Coke Scrap Coking Coal 177 124 448 333 237 211 495 465 Source: SBB, Deutsche Bank Research

…. Impact partially redeemed by reducing raw material prices

21 1.5 0.7 2.7 0.6 0.0 0.5 1.0 1.5 2.0 2.5 3.0 Import Export

Apr ‐Jun' 09 Apr ‐ Jun' 10

75% ‐15% Source: JPC 12.9 13.3

13.3 14.9

10.0 11.0 12.0 13.0 14.0 15.0 16.0 Finished Steel Production Apparent Steel Consumption

Apr ‐Jun' 09 Apr ‐ Jun' 10

3% 12%

Indian Steel Market: Demand continues to be strong

Production Vs. Consumption (MnT) Import Vs. Export (MnT)

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Q1'10, 1.376 Q1'11, 1.574 0.00 0.20 0.40 0.60 0.80 1.00 1.20 1.40 1.60 1.80

Crude Steel

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

All Numbers are in Mn Tonnes

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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, 1.321 Q1'11, 1.191 0.00 0.20 0.40 0.60 0.80 1.00 1.20 1.40

Total Sales

YoY %

‐10% Q1'10, 0.855 Q1'11, 0.859 0.00 0.20 0.40 0.60 0.80 1.00

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, 0.366 Q1 '11, 0.346 0.00 0.10 0.20 0.30 0.40

Value Added (CR/GI/PPGI)

YoY %

‐5%

Rolled : Long

YoY %

46% All Numbers are in Mn Tonnes

Saleable Steel Sales – Q1 FY 11

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Performance Financial

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Particulars Q1 FY 11 Q1 FY 10 Growth Net Sales 4,647 3,894 19%

• Op. EBITDA (excl. Fx Variance)

1,093 747 46%

• Op. EBITDA Margin (excl. Fx Variance)

23.6% 19.1% EBITDA 1,038 988 5% EBITDA Margin 22.2% 25.2% Less: Interest 214 221 ‐3% Less: Depreciation 317 272 17% Profit Before Tax 506 496 2% Profit after Tax 350 340 3% ` Cr.

Financials – Q1 FY 11 (Standalone)

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` Cr.

988 (71) (550) 871 85 48 (333) 1038 EBITDA Q1'10 Volume Cost NSR Mix impact CER/Others FX Impact EBITDA Q1'11

EBITDA MOVEMENT – Q1 FY 11

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PRODUCTION (NT) Q1 FY 11 Q1 FY 10 Growth Plate Mill 38,408 27,727 39% Pipe Mill 12,033 5,432 120% SALES (NT) Q1 FY 11 Q1 FY 10 Growth Plate Mill 34,986 14,376 143% Pipe Mill 12,927 4,308 200%

Particulars Q1 FY 11 Q1 FY 10

Turnover 42.59 17.97 EBITDA + Other Income 7.94 (13.74) Profit After Tax (7.36) (19.92) USD Mn

Operational & Financial Performance - USA

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Particulars Q1 FY 11 Q1 FY 10 Growth Total Income 4,858 4,014 21% EBITDA 1,082 928 17% Less: Interest 273 298 ‐8% Less :Depreciation 361 317 14% Profit Before Tax 447 313 43% Profit After Tax 295 234 26%

` Cr.

Consolidated Financials Q1 FY 11

29 14143 14606 800 (484) 224 (77) Net LT Debt as on Mar'10 New Loan Taken Repayments Fx Variance Movement in FD/MF Net LT Debt as on 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.

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* Not Annualized

Financial Ratios

Particulars Q1 FY 11 Q1 FY 10

• Op. EBITDA Margin (excl. Fx Variance)

23.6% 19.1% PAT Margin 7.5% 8.7% Diluted EPS (`) 18.12* 17.72* ROCE 11.80% 13.72%

Particulars 30.06.2010 31.03.2010

Net L.T. Debt/ Equity (x) 1.02 1.07 Net L.T. Debt/ EBITDA (x) 2.31 2.36 Net L.T. Debt/ Equity – Consolidated (x) 1.41 1.49 Net L.T. Debt/ EBITDA – Consolidated (x) 3.19 3.38

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Progress

Project

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As on Mar 10 As on June 10

BENEFICIATION PLANT

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As on Mar 10 As on June 10

COKE OVEN

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As on June 10 As on Mar 10

BLAST FURNACE

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As on Mar 10 As on June 10

SMS (Phase II)

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Q & A Session

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Certain statements in this report concerning our future growth prospects are forward looking statements, which involve a number of risks, and uncertainties that could cause actual results to differ materially from 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 in earnings, our ability to manage growth, intense competition within Steel industry including those factors which may affect our cost advantage, wage increases in India, our ability to attract and retain highly skilled professionals, time and cost overruns on fixed­price, fixed­time frame contracts, our ability to commission mines within contemplated time and costs, our ability to raise the finance within time and cost client concentration, restrictions on immigration, our ability to manage our internal operations, reduced demand for steel, our ability to successfully complete and integrate potential acquisitions, liability for damages on our service contracts, the success of 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 intellectual property and general economic conditions affecting our industry. The company does not undertake to update any forward looking statements that may be made from time to time by

• r on behalf of the company.

Forward Looking and Cautionary Statement

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Thank you