Blasted past is behind him, finally

In March this year, after nearly a year of deliberations, Sajjan Jindal and his officers were huddled with West Bengal chief minister Buddhadeb Bhattacharya, to finalise their strategy to acquire 5000 acres of land from farmers. Jindal, who runs India’s third largest steel company JSW, had already signed an understanding with the state government to build a 10 million tonne steel plant at a cost of Rs 14,000 crore.Coming on the back of a troubled decade, the ambitious project was Jindal’s one big chance to grow bigger and brace up to face to competition from larger companies like Tata Steel and Korean steel major Posco.
Hours after his meeting with the chief minister, news of police firing in Nandigram made it to television tickers. Bhattarcharya was trying to acquire land from farmers there to make way for industry. The violence, which was preceded by agitations by farmers in Singur to stop Tata Motors from setting up their small car project in West Bengal, seemed to be snowballing into a big controversy. It was beginning to unnerve the Jindal camp—the project was already delayed by two years and now, and the latest events brought in more uncertainty.
Says a close aide who was by Jindal’s side through all the twists and turns, he remained completely unflustered. "I’m a man of steel," he says, on a car ride from his private hangar in suburban Mumbai to his home that overlooks the Arabian Sea. That it is a beautiful home is not saying much. It is a painfully beautiful home. Perhaps, a function of the fact that his wife Sangita has a deep interest in all kinds of art forms. She is also the publisher of Art India, a magazine devoted to quite obviously, art. But that is digressing from the tale.
Even as uncertainty was mounting, political activists arrived at Salboni in West Bengal’s West Midnapore district to dissuade farmers there from selling their land to make way for the steel factory. On his part though, Jindal kept insisting the project and land acquisition will go as per schedule. Truth is, even loyalists in the Jindal camp weren’t willing to buy the argument. It is another matter altogether that they did not articulate it as openly. Seven months later, even as the fires continue to burn in Singur and Nandigram, Jindal has completed the acquisition of 560 acres of land from 750 families (The rest was acquired from the state government).
Critics may carp that the land Jindal acquired was barren. To that extent, it was easier to convince farmers to sell. Friends say it Sajjan Jindal’s personal touch that convinced farmers to sell their land. In addition to all the compensation and jobs promised he offered farmers for giving up their land, Jindal gave them equity shares worth as much as their lands from his own kitty.
Says Jindal: "I can easily relate to farmers as my father was one. By giving away my shares I wanted to send a message that they (farmers) will still have a link to their lands."
Not many understood Jindal’s move to give away shares when it was first announced. A central minister remarked that corporates cannot issue shares in lieu of land while television channels called it a scam. Months later, there are other companies who are seriously considering Jindal’s strategy of making farmers their partners in business. But that’s the way Jindal run’s his business—straight from the heart.
A few years ago, when his company was deep in red, he did something unprecedented. He wrote off a portion of his capital, to share the burden with institutions that lent him money. Recently, Jindal unrolled his own version of retail trade and decided to open 600 franchised outlets across the country—to sell steel. The idea is to promote steel as an ‘environment-friendly’ product that can be recycled. An engineering graduate, Jindal says: "I grew up on steel and everything I learnt is by thinking about steel. I want to increase the consumption of steel by setting up the retail shops."
Rusty past: Now, if Jindal thought only of steel and is among the largest players in the business, why is he not thought off in the same breath as the Tatas or the Ruias of Essar? For one, the steel assets of the Jindal group, the foundations for which was created by Sajjan’s father, was divided between four brothers for over a decade now.
In the next couple of years though, the Jindal combine, is putting into place a plan that they hope will eventually help them corner 25% of the estimated 200 million tonnes of local demand. And Sajjan alone hopes to account for 15% of the local production—as much as Tata Steel’s planned expansion programme.
Step back a decade, you can see that it was the love of steel that slowed down Jindal’s progress in the industry. In the late 90s, Jindal borrowed at high interest rates of 20% per annum to add over a million tonnes in additional capacity. He reckoned the high global interest rates and high steel prices would see him through. And then, he also brought a new Corex technology that replaced traditional blast furnaces in making steel. A largely untested technology, which was deployed by only a couple of steel makers around the world, ran into teething problems initially.
Then, a double whammy struck. Interest rates started softening and global steel prices started bottoming out. Coupled with a prolonged slowdown for five years in India between 1997 and 2002, the share prices of his company fell to Rs 2 while his balance sheets were plastered with red. By now, Jindal’s only focus was to cut costs and focus on keeping employee morale high.
He sunk his meagre finances to harness the waste gases emitted by the corex technology to produce power. Jindal would land up at his factory—to play squash and volleyball with managers and shop floor workers. In any which case, sport has always been a passion with him. If he is in Mumbai, he plays squash religiously every evening. "There is only that much you can do when external factors are not in your favour. Even during those troubled times, I was talking of doubling capacity and that seemed to send a message to my employees that I was not going down."
Says Seshadri Rao, the group’s CFO, who joined Jindal around the time when the troubles started in 1997: "Jindal seemed to know exactly what he was doing. There was not a single occasion he lost his conviction or confidence."
Galvanising the future: A few days ago, Jindal decided to pay Rs 700 crore for a piece of property to build his new headquarters. Earlier in the year, he paid Rs 3,600 crore to buy three steel companies in the US from his elder brother to expand globally. The group has outlined a $10 billion investment in the next three years. Half that money will go to make more steel, a third will be used in setting up power plants and the rest to venture into new areas like aluminium and cement.
Is Jindal biting off more than he chew? As early as 2003, his best steel plant was still making losses. Jindal says it was those decisions that appeared the worst in retrospect are paying the best dividends today. The Corex technology has now made JSW one of the cheapest producers of steel. The waste gases not only generate 260 MW of power but has earned JSW Steel more than 5.4 million carbon credits. "Going for the cutting edge technology will always go in your favour when the tide turns. As the most efficient producers of steel in the world, we are also only of the most profitable players."
It’s again Jindal’s conviction at work. After all the expansion’s are completed, Jindal’s steel making capacity would have gone up six times. Though he has been tutored hard by his father that the cyclical nature of steel prices will bite him hard every ten years, Jindal says that steel consumption is only set to go up in the coming years.
Of course, Jindal is ensuring that certain hygiene factors are in place. For his steel business, he will borrow only as much as the equity he can bring to the table. In the last round of expansion, his debt had gone up to to five time the equity. For his power project, which is not a cyclical business like steel, the debt will go up to three times his capital. With his share prices trading at record levels, Jindal plans to raise additional funds by issuing new shares.
Says Jindal: "If the market dips, we can be sure of not losing our shirts."