JSW seeks partners for alumina, cement plans

Hit by the economic slowdown and a shortage of funds, the $3.7-billion JSW Group is now looking for partners for its greenfield projects in alumina and cement. The company has taken the first step in its endeavour of partnership by collaborating with Japanese steel major JFE Steel Corporation on Thursday for its Rs 35,000-crore, 10 mtpa West Bengal project.

The Sajjan Jindal-led group is now on a watchout for suitable partners for its Rs 4,200-crore aluminum expansion and Rs 1,900-crore cement expansions in Andhra Pradesh.

Confirming the move, Sajjan Jindal, vice-chairman and MD of JSW Steel, told FE, "It is correct that we were looking for partners for our cement business. However, the valuations currently are not looking good for the cement industry and the same applies for the aluminum industry as well. We will bring in partners as soon as the valuations are attractive." The group, which floated JSW Cement Ltd in 2007 to set up a slag-based 4.5 million tonnes clinker facility in Andhra Pradesh, has completed only 30-40% of its civil construction work and expects the plant to become operational only in 2011. The cement plant was initially expected to go on stream by 2009 and was later postponed to 2010.

It is understood that the cement expansion is currently waiting for the financial closure for the equity part of it, which is about Rs 450 crore. However, the debts have been raised. Jindal said, "Due to the valuations, we have decided that we will not make a move for any partner right now, but focus on our own working. We will look for a partner as and when the time arrives. Though there will not be much value addition by the partner in our cement business, in aluminum we will look for a partner who can do an offtake of the alumina," he added.

The cement facility of the group will be a split location plant with the clinker plant in Andhra Pradesh near the limestone deposits and the grinding units will be spread across two locations -- one in Karnataka and the other in Andhra.

A Mumbai-based analyst, requesting anonymity, said, "JSW being a new player in cement, it will be difficult for the company to bring in a partner or attract investors, as the current sector value is much below the replacement value." Similarly, despite achieving the financial closure for its 1.5 million tonne alumina project, it is still awaiting Rs 1,200 crore to be raised via equity.

JSW Aluminum has received the financial closure for its Rs 4,200-crore alumina plant in Vizianagaram district (Andhra Pradesh), of which Rs 3,000 crore would be raised from financial institutions. ICICI (ICICIBANK.NS : 808.05 -4.35) is the lead bank along with 10-12 other banks lined up for funding. JSW Aluminum Ltd (JSWAL) was incorporated on July 8, 2005, as a special purpose vehicle to implement this project and the plant was expected to become operation in April 2010.

"The past few months have seen an improvement in demand for base metals. Going forward, improved economic environment and stronger demand would lead to improvement in the volumes of the domestic players," said Angel Broking in its report.