Ways2Capital Reviews : Jindal Steel & Power Falls 6% After Naveen Jindal Faces Additional Charges In Coal Scam Case

The Chairman of Jindal Steel and Power Ltd (JSPL), Naveen Jindal is now facing an additional charge for abetment of bribery in the coal scam case, according to media reports. A special court has ordered framing of an additional charge of abetment of bribery against Naveen Jindal and others in a case pertaining to irregularities in the allocation of the Gare Palma IV/1 coal block in Jharkhand, the reports added. The CBI had earlier questioned Jindal on allegations of cheating and corruption.

The impact of this case would not directly impact the operation of JSPL. However, the negative sentiment from this development along with a weak performance from metal stocks in the past few sessions implies that we could see more near term weakness in the stock.

Jindal Steel and Power (JSPL) is close to completing its turnaround and would reach profitability by FY19E. This turnaround is strongly supported by 30.8% CAGR in steel volumes over FY18-20E after the steel plant in Angul becomes operational. Power volumes are also expected to grow at 22.6% over the same period. As a result of higher volumes, we expect revenue CAGR of 23.4% over FY18-20E with an EBITDA margin of 25.9% in FY20E.

JSPL has a domestic steel capacity of ~8mtpa and 2mtpa capacity steel mill in Oman under its subsidiary Jindal Shadeed (100% stake). The company's international coal mining operations have a capacity of ~2mtpa. The company has 3,400MW capacity for commercial power generation. Of the 3,400MW, a 1,000MW plant is expected to be divested to JSW Energy by 1QFY19E. Consolidated steel production for FY18 stood at 5.7mt, while power generation stood at ~10.9bn units. Utilization for the power segment stood at ~37% for FY18, as poor coal availability hampered power production.
 
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