Deepening our commitment to the twin objectives of Speciality & Sustainability
Overview
The performance of the company during the year under review represented a watershed in
our existence. At first glance, this watershed status was due to the company reporting its
highest ever revenue from operations of H6,413.78 Crore in FY 2023-24, a substantial
rebound from the H2,785.18 Crore reported in FY 2020-21 at the trough of the industry
downcycle and a challenging phase in the company's history.
Importantly, this growth was not achieved by simply dumping the market with our
products. Growth was achieved by making niche steel products addressing critical and
demanding requirements. The result was that during the FY 2023-24, EBITDA was H1,121 Crore
corresponded by an EBITDA margin of 17%.
This out performance could not have come at a more opportune time, as the Indian steel
market faced challenges due to a combination of domestic and global factors during the
last financial year. Demand from major downstream consumers, such as construction,
automotive, and infrastructure, was sluggish. Project delays, coupled with issues related
to the overall economic environment and reduced spending, contributed to lower steel
demand. Additionally, the global steel market encountered overcapacity, leading to price
pressures. The prices for key raw materials, such as iron ore and coking coal, fluctuated
significantly. The availability of cheaper imported steel, primarily from China, remained
a challenge, compelling domestic producers to moderate their prices. Stricter
environmental regulations and increases in compliance costs associated with pollution
control affected operational efficiencies and costs for steel producers.
Faithfully true
The company's business model was designed for markets like those experienced during the
last financial year. Our performance represented a validation of business priorities. We
positioned ourselves in market segments that are relatively insulated from imports and
price erosion. I am pleased to communicate that two such segments—ductile iron pipes
and speciality ferro chrome alloys—operated in relatively protected spaces and
performed creditably during the last financial year.
The aggregate revenues from these segments increased from 39.46% in FY 2022-23 to
47.29% in FY 2023-24. Additionally, the average realisation per tonne of ductile iron
pipes strengthened by 18%, while the average realisation of speciality ferro chrome alloys
rose by 28%. We believe that the performance of these segments remained commendable
despite a relatively stable rupee and declining steel prices.
This outperformance was not a one-off event; it was the result of our deliberate
positioning as a speciality steel products manufacturer over a generic one. Our rationale
for this distinctive positioning stemmed from the belief that demand and realisations for
speciality steel would remain consistent in an economy committed to investing in
infrastructure. Furthermore, we recognised that the speciality steel space is relatively
under-crowded, providing pricing power that would generate adequate surpluses for
reinvestment.
Ductile Iron pipes are essential for ensuring efficient and reliable water
distribution, deepen our recall and transition us from just another steel manufacturer
into a credible value-enhancing institution. The performance of the company during the
last financial year represented a decisive step towards that vision.
In the recent past, the company launched a product named ‘JBG HEXA'. We aim to
deliver the best TMT steel bars, manufactured by our qualified and dedicated workforce, in
a socially and environmentally responsible environment, making them the cornerstone of
modern infrastructure. With a strong commitment to excellence, we are playing a
significant role in supporting government initiatives like Jal Jeevan Mission and AMRUT
(Atal Mission for Rejuvenation and Urban Transformation). By aligning our efforts with
these vital programs, we are contributing substantially to improving water accessibility
and quality across regions. Our focus on DI pipe innovation and production underscores our
commitment to advancing these critical water projects and enhancing the sustainability of
water resources. The company accounted for around 10% of the DI pipes market of India and
aims to reach 18-20% market share, capacity expansion.
The company's business model was designed for markets like those experienced during the
last financial year. Our performance represented a validation of business priorities. We
positioned ourselves in market segments that are relatively insulated from imports and
price erosion. I am pleased to communicate that two such segments—ductile iron pipes
and speciality ferro chrome alloys—operated in relatively protected spaces and
performed creditably during the last financial year.
We are confident that this distinctive positioning at Jai Balaji will generate superior
brand upsides. By being recognised as a counter-cyclical speciality steel products
following company, we will build a stakeholder community comprising the best talent,
vendors, investors, and customers. This distinctive positioning will seeking to not just
meet customer needs but also in building the community by implementing the best business
and production practices. We are gearing to extend our market presence with the aim to
enter the B2C segment with this product.
Taking the business ahead
At Jai Balaji, we recognise the urgency of scaling our business in line with the
growing infrastructure programs in the country and the widening appetite for speciality
steel products. While there will always be an ongoing need for generic steel products in
nation-building, we are confident that there will be disproportionate demand growth for
speciality steel products.
The expansion of sectors like automotive, aerospace, construction, energy, and
manufacturing drives the demand for speciality steel. Technological innovations will lead
to new applications for speciality steel products; advanced manufacturing processes and
materials science will catalyse the demand for higher-strength, lighter-weight, and
corrosion-resistant steel grades. There will be an increasing demand for speciality steel
in infrastructure projects like bridges, highways, and railways that require materials
capable of withstanding extreme performance conditions. The automotive sector is shifting
toward lighter steel to enhance fuel efficiency and reduce emissions. Furthermore, the
focus on renewable energy and energy efficiency has spurred demand for speciality steel
products in the manufacture of wind turbines and solar power systems. The aerospace and
defence industries seek speciality steels for components that require superior strength
and heat resistance. A growing demand for consumer electronics and technological gadgets
will drive the need for more speciality steel in machinery, casings, and components that
demand precision and durability. Strengthening regulatory requirements for safety,
durability, and environmental performance will likely add to speciality steel demand.
There is an emerging need for specialised alloys and grades that address strict
performance criteria, along with a widening focus on low-carbon and recyclable materials,
leading to the development of speciality steel products that meet these standards.
Union Budget 2022-23 to H11.11 Lakh Crore in Union Budget 2024-25. This 21.71%
compounded annual growth has been higher than the national economic growth. Even as it
took India 74 years to reach an infrastructure outlay of H5.54 Lakh Crore until 2021-22:
it took the country just three years to add another H5.57 Lakh Crore. This indicates that
India is reaching an inflection point in infrastructure spending, translating into
widening downstream opportunities.
We will continue to focus on product and process development with the goal of
developing new niche products that advance our speciality steel brand in larger markets
providing superior realisations.
Preparedness
This optimism is being derived from the direction spelt out in the Union Budgets
starting In the last three Union Budgets, increased the capital outlay for infrastructure
from H7.50 Lakh Crore in
At Jai Balaji, we have deepened our preparedness for this evolving environment.
De-risked personality
At Jai Balaji, we believe that the most sustainable companies are those that are
largely de-risked in a world of increasing uncertainties and Black Swan events. This focus
has been prioritised at our company and reflected in the following initiatives:
Investment in advanced technologies: We invested in advanced technologies aimed at
maximising the efficient conversion of resources into end products. This goes beyond
achieving a superior input-output ratio; this will generate emissions and effluents that
are well below the norms specified by regulatory authorities. We intend to reduce power
consumption from finite fossil fuels by integrating renewable alternatives, moderating our
carbon footprint to among the lowest for speciality steel companies of our scope and
scale.
Debt-free transition: We are striving to become a net worth-driven company. Over
the next few years, we expect to repay all existing debt and become a net cash company
with ample resources for reinvestment.
Modular capex programmes: We will engage in modular capital expenditure programs,
marked by staggered investments in smaller installments. The progressive commissioning of
capacities will generate a surplus that will be immediately reinvested, moderating overall
cost of doing business.
Cutting-edge technologies: Our focus will include investing in cutting-edge
technologies that ensure the best quality of speciality steel, the most efficient resource
conversion, the lowest manufacturing cost, and the smallest carbon footprint.
Product and process development: We will continue to focus on product and process
development with the goal of developing new niche products that advance our speciality
steel brand in larger markets providing superior realisations.
Acquisition strategy: The company will remain open to acquisitions that can
transform into enhanced value, accelerating our growth journey.
Outlook
We believe that balancing these priorities will deepen our commitment to a
volume-and-value proposition that protects sustainability across market cycles and
enhances value for all associated with our company.
Aditya Jajodia
Chairman and Managing Director