India's two largest steelmakers are pursuing different routes to their next phase of growth, reflecting contrasting priorities in an increasingly competitive market. While JSW Steel is expanding its steelmaking capacity mostly through new projects and joint ventures, Tata Steel is betting on higher-margin, value-added products.
JSW Steel, India's largest steelmaker, led by CEO and joint managing director Jayant Acharya, aims to double its steelmaking capacity to 80 million tonnes per annum (mtpa) by 2031 through brownfield and greenfield expansions and joint ventures. This would make it one of the world's largest steel producers outside of China.
Tata Steel, the country's second-largest steelmaker, meanwhile, believes growth need not be driven by relentless capacity addition. The company, led by CEO and managing director T.V. Narendran, is prioritizing expanding its portfolio of downstream products such as precision tubes, speciality steel wires, coated sheets and tinplates.
JSW, part of the Sajjan Jindal-controlled conglomerate, has forged at least two joint ventures with foreign partners: Japan’s JFE Steel Corp. and South Korea’s Posco, which will help the Indian steel major add 16 million tonnes (mt) capacity. It has also raised its standalone capacity target to 62 mtpa by FY32 from its earlier goal of 50 mtpa by 2031.
“Yes, we would like to be one of the largest steel players globally and I think this brings us to the top few in the world," Acharya told Mint at the steelmaker’s headquarters in Mumbai business district Bandra Kurla Complex in May.
By comparison, Tata Steel has a capacity target of 40 mt from a domestic capacity of 27.4 mt. Initially, the guidance was to reach this target by 2030, the company is now not in a hurry to increase capacity.
“At some point in time in the future, the downstream volume can be bigger than upstream. I can always buy upstream from someone else," Narendran had told Mint in an earlier interview.
In the steel industry, upstream refers to the production of primary steel and downstream involves processing this primary steel into higher-value, ready-to-use products such as precision tubes, specialty steel wires, and coated sheets for use in automobiles, construction, infrastructure and agriculture.
Tata Steel is unlikely to see a significant increase in steel volumes before 2031, when the 4.8 mtpa expansion at its Neelachal Ispat Nigam Ltd unit is to be commissioned.
Tata Steel, to be sure, has the option to expand capacity to 65 mt—Narendran said earlier that it is in talks with the Maharashtra government for around 3,000 acres land in Gadchiroli that could support a 15-million-tonnes expansion.
Separately, the CEO is of the view that in the domestic market, Tata Steel wants to fly solo rather than in partnerships, as India’s steel demand grows at a steady pace.
JSW Steel has outperformed both Tata Steel and the benchmark Sensex this year, with its shares gaining 12.28% from the beginning of the year versus Tata Steel's 6.22% rise and the Sensex's 7.60% loss.
However, not all analysts are convinced by that approach.
"Steel remains a scale business. Companies first need to build upstream capacity and then add downstream capabilities," said Sumangal Nevatia, director at brokerage Kotak Institutional Equities. “Tata Steel has traditionally grown both together, but this time, its upstream expansion is progressing more slowly.”
He pointed out that expansion at both ends of the value chain can be pursued with a strong balance sheet like JSW Steel and Jindal Steel are doing. Jindal Steel, India's no. 5 ranked steel maker by capacity, is controlled by Naveen Jindal, Sajjan's younger brother.