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Won't give away control of JSW Steel: Sajjan Jindal
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July 06, 2006

Sajjan Jindal, vice chairman and managing director of JSW Steel [Get Quote] feels that there is no reason to raise steel prices further. He does not see much rise in steel prices from the current levels.

He says that steel demand in the US, Europe and the Far East is strong, while Indian steel prices are lower by $50-60 per tonne. He adds that the steel industry has to go through a consolidation.

He further adds that they won't give away the control of JSW Steel. He states that they are open to participation with global majors and they are looking at potential acquisitions overseas. Moreover, he does not see a major consolidation among Indian steel companies. He believes that Tata Steel [Get Quote] and SAIL [Get Quote] are potential take over targets.

Excerpts from CNBC-TV18's exclusive interview with Sajjan Jindal:

Do you seriously believe that there is a threat to Indian steel companies from large global players such as Mittal?

I think that there are only two Indian companies, which could be threatened, and one is Tata Steel. This is because the Tata's were only holding 24 per cent and any company, which is promoted by a group and which holds only 24 per cent is quite a target. So I am sure that Tata Steel is spending some sleepless nights because it is certainly a very good target, the valuations are still quite low and there is a huge asset out there, which could be acquired at a comparatively low price.

Other than Tata Steel, the Steel Authority of India, SAIL, in which the government owns 85 per cent, might not be a threat target but it is a good company. If one were to consolidate, then Sail would be a very good target if the government were to privatise that company.

Besides these two companies, I don't see any other company as a target because some of them are not very good companies, even if the promoter holding is less and another reason would be that the other companies are held by promoters where they own more than 40-45 per cent equity.

What about the Jindal group itself, what are your holdings and what would your response be if there is any kind of a feeler, which is sent from a global major? Would you be willing to look at any such equity alliance if not a takeover?

On the contrary, we ourselves at Jindal Group are looking at acquisitions abroad and are trying to take over companies and looking at such targets, both internationally and within India. So we would be happy to take over such companies and such targets.

Would a company like yours be open to a partnership with someone as big in the global arena like Mittal Steel perhaps?

Well certainly, this is the time to consolidate and have associations and unless there are co-operations and associations, the industry will not grow. So we are open to the idea of a partnership with global majors, but we would like to be in a controlling position and not give away our control on the company because we believe that we are in a good position to manage the companies.

How do you read the steel cycle at this point, both in terms of pricing and in terms of demand, especially in Asia?

The steel cycle at the moment is quite robust and it is on a high. Steel is a cyclical industry and at the moment, we are riding the crest. Over some time, as the consolidation in the industry happens, the stability in the industry would happen. The case in point is the aluminium industry, which used to be a highly fragmented industry and very cyclical in nature.

But as consolidation in the industry took place, the industry became much more stable and there was long-term value for shareholders. I feel Mr Mittal's taking over or joining hands with Arcelor is a very good step in the right direction, which will bring a lot of stability to the steel industry.

Where are prices exactly in US, China, Europe because we get various figures when we speak to various analysts but you are on the ground and might know, can they support another hike in August for local companies such as yourself in the local market, since you have done it two months on the trot?

Globally, steel is riding on a high. In the US, prices are very high and even in China prices are quite stable and are still continuing to move up, while in Europe, prices are very strong. I have always said that there are three growth sectors in the world or the markets; one is the US or the American continent, second is Europe and the third is  China-Japan, that is the Far East.

At the moment, all these three markets are consuming a lot of steel and there is very good demand, so prices are very strong. If one talks of India per se, then we are lower by international standards to the tune of USD 50-60 and so there is a huge scope to increase prices but we, within the country feel that the country cannot afford increasing steel prices any more and I don't see steel prices going up much from here on.

Where are those international prices at this point, about $600?

That is correct, the home market price in the US is around $700 but otherwise, globally it is at $600.

So there is a fair chance that by next month there might be another price hike by domestic steel players?

It could be only in the form of a correction. I do not see a real price increase taking place across the board. There could be some correction in some grades but I, for one, would say that these prices are quite good prices. Steel companies are making quite healthy profits and there is really no reason for us to increase prices from here on.

What shape do you see consolidation taking, if at all it reaches Indian shores? Do you think in the next six months to one year, you will see any kind of a consolidation move, either prompted by a global or a local player in the domestic steel market at all?

It is very difficult. India is very typical; here we are all like first generation entrepreneurs building steel capacities and are very passionately involved with our businesses. So I do not see any real consolidation happening in this industry in India or a global major coming into India and taking over.

It could be some time players like we took over Siscol, Southern Iron and Steel Company Ltd, company in Tamil Nadu and now OP Jindal group is managing that company. So there could be these small time takeovers or mergers that could happen. Within the group also, you could see various companies merging together to form a larger pie but otherwise, I do not see a major consolidation happening within the Indian steel system.

LN Mittal has actually done a good job of picking up what did not look like very good steel assets and turning them around. Loss making companies in many parts of the world, could he be looking at something like  Ispat or Lloyd Steel or maybe, even at Essar Steel [Get Quote], because he thinks that he could do a lot with those?

Yes, he can certainly provide the kind of leadership that is required for the Indian steel industry but the promoters or the entrepreneurs hold either 45-50-55 per cent in each company and unless they are willing sellers, it is not going to be possible. Given today's steel industry situation, I do not think that anybody would be a willing seller today.

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