Question: How much risk can you take?
Jindal Steel: Yes
Is the story brave or foolish? Here is a deep dive.
The company is planning to increase capacity
Iron Ore by 28%
Iron making by 63%
Liquid Steel by 65%
Finished Steel by 90%
That is a lot of capex, all at once
Inherent Assumption 1: Demand would increase to absorb the capacity without fall in prices
Risk: Would demand increase fast enough? Would other players not expand?
From this capex, a very major chunk goes to the Coal Gasification Plant in Angul steel complex. It would help reduce imports and save costs, but here’s the catch
It is the world’s first and largest coal gasification plant integrated with steelmaking. The technology and execution is not proven elsewhere.
Inherent Assumption 2: Jindal Steel would achieve success in their ambitious new technology integration
Risk: obviously execution.
(on a side note, kudos to them for betting with R&D, It is the direction Indian manufacturing needs to take)
But on top of these risks, 40% of revenue came from the infrastructure segment in FY25. A major chunk comes from government projects.
Inherent Assumption 3: For next 5 to 7 years, the government would keep building infrastructure at a fast pace.
Risk: A simple policy shift at state or centre level
A fundamental question for investors is - would they like to bet on these assumptions?
Disclaimer - This is educational content. This is not a stock recommendation. Any feedback or counter viewpoints are welcomed..