Jindal Steel & Power's latest new capital expenditure announcement of Rs 16,000 crore has come as a surprise to the Street.
The company, while reporting its earnings for the third quarter of financial year 2025, announced a new capex outlay for the next three years and is focused on efficiency improvement and cost reduction.
Earlier Capex
The new capex announcement comes over and above the Rs 31,000 crore already announced by the company. Jindal Steel and Power has spent around 76% or Rs 23,600 crore of this capex so far.
The balance is expected to be spent in FY26.
New Capex Allocation
Around Rs 5,700 crore of the Rs 16,000 crore capex announced would be spent for enhancement of projects. This includes setting galvanising and colour coated lines.
Rs 4,500 crore will be allocated for integrated supply chain projects while Rs 2,900 crore will be used for sustenance capex.
The proposed capex aims to increase the company's total crude steel capacity from 9.6 MTPA in FY24 to 15.9 MTPA in FY27.
Analysts' View On New Capex
As per ICICI Securities, the additional capex in the current operating environment raises some concerns and could be a deterrent for the stock performance.
Morgan Stanley stated that the new capex announcement came as a surprise to the brokerage. Motilal Oswal and Nuvama Research state that they require more clarity on the announcement.
Could JSPL's Debt Rise Further?
As of H1FY25, Jindal Steel & Power's cash and cash equivalent stood at Rs 1,357.64 crore, while the company's net debt stood at Rs 12,464 crore. This net debt value has already increased to Rs 13,551 crore since the company raised new debt of Rs 2,249 crore during the quarter.
The company's net debt to Ebitda ratio now stands at 1.4x as of Q3FY25, which is the highest level seen since FY22. As per the company's management, the debt is nearing its peak and it expects the ratio to remain below 1.5x.
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