Jindal Steel- Swot Analysis

7/31/2019 Jindal Steel- Swot Analysis

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Opportunities-O

1. Tariff structure

2. Expansion plans

3. Concessional custom duties

4. Exchange rate fluctuations

5. Changes in technology

6. Monetary policies by government

SWOT ANALYSIS OF

JINDAL STEEL LIMITED

(JSW)


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7. Performance of financial markets

8. Mergers and acquisitions in future9. Boom of infrastructure sector.10.

Potentially huge domestic demand.

11. Urbanization.12. Untapped rural market.13. Demographic conditions that favour Increasingdemand for consumer durables.

14. Increasing interest of domestic and overseas producersin capacity creation to serve the domestic and overseas

markets.

Threats- T

1. Structural problems in domestic industry due to highcost of commissioning new projects.

2. No significant improvement in domestic demand.

3. State policies

4. Loss of steel production in karnataka due to acuteshortage of iron ore will lead to 0.5% impact on India's GDP

5. Political instability

6. Environmental pollution

7. Global competition

8.

Significant percentage of the revenue is from exportswhich is subjected to uncertainties

9. Expansion plans subjected to risk of cost and timeoverruns.

10. Trade barriers in developed markets.


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Strengths-S

1. Value proposition: Nurture lasting customer relationships anddelivery.

2. Continuous improvement in the value chain.

3. Capacity: 14.3MTPA4. Lowest cost steel producers in the world.5. Total assets: 28320 Cr. INRRevenue: 13846 Cr. INR

6. Largest pvt. Sector steel manufacturer in terms of installed capacity.7. EBIDTA margin : 20.8%Net sales growth: 37.4% y-o-y

Demand for steel expanded at a CAGR of 8.7% in FY 07-11.

Estimated Industry CAGR: 10%

8. Greentech Environment Excellence Award 2009 and KarnatakaChapter Safety Award 2009 for its environmental sustainability and safety.

9. Geographical spread: India, Chile, US and Mozambique.Manufacturing units at : Maharashtra, Karnataka, Tamil Nadu.

10. Better logistics through as all the locations are connected by ports,railroad and trucking.

11. Low Attrition rate: 6%

S-O Strategy Box

1. Harvesting tariff rate changes and concessional custom duties byboosting seasonal exports

2. As they are lowest cost steel producers in the world and the continuous

improvement in value chain made by JSW, they can use the opportunity to

get contracts related to supply of steel to infrastructure projects

3. Since the need for steel is not a dimnishing parameter, employ effective

hedging techniques to combat exchange rate fluctuations

4. Harness the potential of expansionary policies to make investment in

innovative measures to sustain the value chain

5. Utilization of automation and modern technology to refine the process

of steel making and thereby cost cuts could be achieved further on.

6. As JSW is spread across Maharashtra, Tamil nadu and Karnataka, JSW

can expand its operation to rural markets in these states.


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7. Since it specializes in long steel productsrails and H beamsthat are

used in construction and remain in demand as India continues to build

infrastructure and to sustain this they can diversify their business.

S-T Strategy Box

1. keeping the costs low already made them stand out even in the time of

downturn and thus they can face the global competition with improved

operating margins. [existing margin= 40%]

2. As the demand for steel is expanding at a CAGR of 8.7% overall in FY 07-

11, they can overcome the insignificant domestic demand by framing the

output mix based on Demand estimation in domestic markets.

3. Buy out more resources rather than producing more as there exists, a

shortage of raw material to gear up the production.

4.It's important to be profitable and efficient than being big. So,attempting

calculative risks in implementing new expansion plans is a wise strategy.

5. Having backward integration with it's own captive source of raw

materials helps keep costs down and protects them against industry

cycles.


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Weakness- W

1. Structural problems in domestic industry due to high cost ofcommissioning new projects.

2. Shortfall in electricity supply and heavy electric charges.3.Scaling down of production to 30% and met a loss of 4300

cr. INR due to abrupt stoppage of Iron ore.4.Strikes, stoppages/increased wage demands

5. Inadequate supply of water6. Inability to manage the growth of the industry which could

disrupt the business and reduce the profitability

7. Environmental regulation imposes additional costs8. Custom Duties impacts on limitation in exports9. Because they couldnt meet their debts, the ability to expandthe plant is restricted.

10. EBITDA decline QoQ- 4%

W-O Strategy Box

1. Exploit the changes in tariff structures to meet the tradebarriers.

2. Huge domestic demand can support investment in

domestic industry to improve structural issues. So, Combat

the structural problems in domestic industry by effective

utilization at the time of expansionary monetary policy.

3. Rural markets can be an option for business in order to fulfill

the financial gaps that might arise from other markets.

4. Harness renewable energy resources to combatEnvironmental issues.

5. Enter forward integration in areas with demographic

conditions that favors the increasing demand.


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W-T Strategy Box

1. Strengthening of logistics and supply chain

2. Suffice the electricity shortage by backingup high capacity CAT

generators and harvesting the major supply from Jindal Power

limited rather than from government.

4. Integrate potential acquisitions with a controlling-stake in high

growing steel industry to compensate the loss and try to executethe projects which are in work-in-progress mode.

5.Maintain Sell on the stock rather than employing buy-back,

because the alternate iron ore supplies from other states are

expensive and unviable.

6. Construct Thickener plant for recycling of used water

7. Diversification of the existing business. Looking to the

business in servicing perspective rather than looking it in

manufacturing perspective alone.

8. Creating sustainable business model rather than working on

vulnerable model and framing a Business continuity plan.

9. Managing market swings by rejigging the output mix and

employ cost cutting techniques through innovation.

Jindal Steel- Swot Analysis

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