Jindal Steel - Swot Analysis

SWOT ANALYSIS OF JINDAL STEEL LIMITED (JSW)
Opportunities-O 1. Tariff structure
2.
Expansion plans
3. 4. 5.
Concessional custom duties Exchange rate fluctuations Changes in technology
6.
Monetary policies by government
7.
Performance of financial markets
8. Mergers and acquisitions in future 9. Boom of infrastructure sector. 10. Potentially huge domestic demand. 11. Urbanization. 12. Untapped rural market. 13. Demographic conditions that favour Increasing demand for consumer durables. 14. Increasing interest of domestic and overseas producers in capacity creation to serve the domestic and overseas markets. Threats- T 1. Structural problems in domestic industry due to high cost of commissioning new projects.
2.
No significant improvement in domestic demand.
3.
State policies
4. Loss of steel production in karnataka due to acute shortage of iron ore will lead to 0.5% impact on India's GDP
5. 6. 7.
Political instability Environmental pollution Global competition
8. Significant percentage of the revenue is from exports which is subjected to uncertainties 9. Expansion plans subjected to risk of cost and time overruns. 10. Trade barriers in developed markets.
Strengths-S 1. Value proposition: Nurture lasting customer relationships and delivery. 2. 3. 4. 5. Continuous improvement in the value chain. Capacity: 14.3MTPA Lowest cost steel producers in the world. Total assets: 28320 Cr. INR
Revenue: 13846 Cr. INR 6. 7. Largest pvt. Sector steel manufacturer in terms of installed capacity. 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 Karnataka Chapter 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 by boosting 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.
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 0711, 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.
Weakness- W 1. Structural problems in domestic industry due to high cost of commissioning 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 water 6. Inability to manage the growth of the industry which could disrupt the business and reduce the profitability 7. Environmental regulation imposes additional costs
8. Custom Duties impacts on limitation in exports 9. Because they couldnt meet their debts, the ability to expand the plant is restricted. 10. EBITDA decline QoQ- 4%
W-O Strategy Box
1. Exploit the changes in tariff structures to meet the trade barriers. 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 combat Environmental issues.

5. Enter forward integration in areas with demographic conditions that favors the increasing demand.
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 execute the 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.

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What are the opportunities and threats mentioned for Jindal Steel Limited?

What are some of the strengths of Jindal Steel Limited?

SWOT ANALYSIS OF JINDAL STEEL LIMITED (JSW)

Opportunities-O 1. Tariff structure

Concessional custom duties Exchange rate fluctuations Changes in technology

Monetary policies by government

Performance of financial markets

No significant improvement in domestic demand.

Political instability Environmental pollution Global competition

4. Strikes, stoppages/increased wage demands

W-O Strategy Box

4. Harness renewable energy resources to combat Environmental issues.

W-T Strategy Box 1. Strengthening of logistics and supply chain

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