Detailed Rationale

Crisil Ratings has assigned its ‘Crisil AA/Stable’ rating to the non-convertible debentures of Rs.819 crores[1] of Jindal Stainless Ltd (JSL; part of the Jindal Stainless group). Crisil Ratings has also reaffirmed its ‘Crisil AA/Stable/Crisil A1+’ ratings on the bank loan facilities and existing non convertible debentures.

 

The rating reaffirmation reflects the strong business risk profile of JSL, driven by the scale of operations, forward integration, and efficient working capital management along with healthy demand outlook. This will continue to support the high cash accrual and sustenance of strong financial risk profile.

 

The ratings continue to factor in the market leadership position of the group in the domestic stainless steel (SS) industry, both in terms of manufacturing capacity and sales volume, efficient operations and sizeable export presence. With combined steel melting capacity of 3.0 million tonne per annum (MTPA), the group is among the top 10 SS manufacturers globally. The ratings also factor the healthy financial risk profile of the group, led by healthy operating cash accruals, comfortable debt protection metrics and strong liquidity.

 

Furthermore, JSL’s consolidated volumes grew around 23% on-year in fiscal 2024 on account of healthy domestic demand, with earnings before interest, taxes, depreciation and amortisation (Ebitda) per tonne at around Rs 21,600 in fiscal 2024. During the first nine months of fiscal 2025, the Ebitda per tonne has slightly moderated to Rs. 20,837, which is largely on account of global macroeconomic factors and subdued export demand.

 

That said, JSL’s Nickel Pig Iron (NPI) smelter facility in Indonesia - JSL had entered into a collaborative agreement with New Yaking Pte Limited in March 2023, to acquire 49% stake in Nickel Pig Iron (NPI) smelter facility - had commissioned in Q2FY25 (originally scheduled for commissioning in April 2025), which should enhance the NPI raw material security for the company going forward. Overall, Crisil Ratings expects the consolidated Ebitda per tonne to remain at ~Rs. 20,000, supporting healthy consolidated Ebitda and strong financial profile with net leverage (ratio of net debt to Ebitda) below 1.5x during the period.
 

Also, Crisil Ratings expects that the earnings of JSL are not to be materially impacted by the potential increase in trade tariffs by the US on stainless steel and other imports, given the limited exposure of JSL to the US (expected to < 5% of JSL’s total volume). However, developments on the said front will remain monitorable.

 

Further, Crisil Ratings has taken note of the recently announced capital expenditure (capex) by the group for ~Rs 5,700 crore (increased on account of acquisition of remaining 46% stake in Chromeni Steel Ltd for Rs. 278 crore) for both organic and inorganic growth. The capex consists of a 51:49 JV in Indonesia (JSL to be 49% stake partner) for setting up an SS capacity of 1.2 MTPA through nickel pig iron (NPI) route, acquisition of a 0.6 MTPA cold rolling plant in Gujarat (Chromeni Steel Ltd), brownfield expansion of downstream capacities (HRAP [hot rolled annealed and pickled] and CRAP [cold rolled annealed and pickled] coil facility) at the existing Odisha plant, as well as upgradation of processing capacities at the Odisha plant with augmentation of infrastructure, ESG projects and specialty steel manufacturing to commensurate with the increased manufacturing capacity of the group.

 

Crisil Ratings understand that the announced capex will be undertaken over 2-3 years and will be primarily funded through internal accruals. Consequently, debt will increase marginally in fiscal 2025. However, overall debt metrics are expected to remain comfortably below the rating thresholds. Crisil Ratings has also taken note of the company’s articulation to maintain net leverage below 1.5 times, which will be a key monitorable. Timely execution and ramp-up of facilities without material impact on the capital structure of the company will be a key monitorable.

 

These strengths are partially offset by susceptibility to input cost volatility, realisation and the volatility in the SS industry. The group also faces competition from cheaper Chinese imports. Substantial increase in imports may adversely impact realisations and volume, and hence, remains a key monitorable.

[1]Yet to be placed

Analytical Approach

Crisil Ratings has consolidated the business and financial risk profiles of JSL, Jindal United Steel Ltd (JUSL; ‘Crisil AA/Stable’) and their subsidiaries. The entities, collectively referred to as the Jindal Stainless group, are in the same business and have strong business and financial linkages and common promoters.

 

Please refer Annexure - List of Entities Consolidated, which captures the list of entities considered and their analytical treatment of consolidation.

Key Rating Drivers & Detailed Description

Strengths:

• Superior market position along with adaptability in the manufacturing process: The Jindal Stainless group has manufacturing plants in Jajpur, Odisha (2.2 MTPA), and Hisar, Haryana (0.8 MTPA). It is the largest manufacturer of SS flat products in India. Capability to manufacture a wide variety of grades across all series of SS (200, 300 and 400 series—classified based on exact content of nickel and other alloys) helps cater to a diversified end-user base comprising process industries (pharmaceuticals, oil & gas, pharma, aerospace, defense, nuclear power, and among others), equipment manufacturers, automobile-railway-transportation (ART), architecture-building-construction (ABC) and consumer goods (durables and kitchenware) sectors. Furthermore, it can switch manufacturing between various grades of SS within a short time based on demand.

 

In fiscal 2024, exports increased to 13% from 11% in fiscal 2023. At the group level, volume growth was around 23% on-year in fiscal 2024. During the first nine months of fiscal 2025, exports moderated to 10%, vis a vis 14% during the corresponding period last year. That said, domestic demand remains healthy, which is reflected by 8% year on year increase in consolidated volumes for the period.

 

The group’s units have well-defined target geographies (the Haryana plant focusses on north and west markets while the Odisha plant focusses on south and east markets) and have varied product segments, including valued-added products such as precision strips, SS blades used in razors, and coin banks for national and foreign mint.

 

• Strong domestic demand outlook leading to significant capex: The domestic demand outlook for SS will be healthy over the medium term as it is finding increasing acceptance across multiple industries, such as consumer goods, process industries, ABC and ART. Owing to low corrosion and lifecycle cost, SS has become the preferred material in the Railways for manufacturing coaches (like the Vande Bharat) and foot-over bridges.

 

As a result, the company announced capex of ~Rs 5,700 crore (increased by Rs. 268 crore due to acquisition of remaining 46% stake in Chromeni) to be undertaken over the next 2-3 years to enhance manufacturing and forward integration capacities. It will form a JV in Indonesia with 49% stake to increase its SS capacity by 1.2 MTPA. It has acquired a 0.6 MTPA cold rolling plant (Chromeni) in Gujarat as part of forward integration. Further, it is setting up HRAP and CRAP coil facility in Odisha. It is also upgrading its facilities in Odisha and Hisar to cater to the increased capacity of the group.

 

• Sustained improvement in Ebitda per tonne led by operating efficiency: Consolidated volumes rose by around 23% on-year in fiscal 2024, led by healthy domestic demand for SS. Ebitda per tonne improved to around Rs 21,600 (around Rs 20,000 in fiscal 2023) on account of downstream capacity additions, operational efficiency, product integration and synergy benefits. While volumes have improved by 8% year on year during the first nine months of fiscal 2025, the ebitda per tonne has moderated to Rs. 20,837, largely on account of global macroeconomic factors and subdued export demand.

 

While realisations are dependent on the prices of inputs (nickel and chrome ore) and product mix (200, 300, 400 series), the group has undertaken several measures to improve its operating performance. The JSL plant has installed a railway siding and inland container depot to transport raw materials and finished goods, leading to savings on logistics costs, and has substituted high-cost propane with cheaper coke oven gas. Furthermore, the JSL plant is in Odisha, which has 93% of India’s chromite ore reserves (apart from nickel, chrome is a key input in making SS) and is supported by a captive 264-megawatt (MW) power plant which meets the bulk of its power requirement. Furthermore, with the acquisition of a stake in the NPI smelter facility, the group is looking to secure its raw material requirement going forward. It has the flexibility to shift production to SS series with lower nickel content (such as 400 and 200 series) depending on market conditions, which enhances sustainability of operations. The company has diversified its product offerings via inorganic acquisition of Rabirun Vinimay Private Limited and JSL Super Steel Limited (erstwhile Rathi Super Steel Limited) to foray into pipe and tube products and long products as well.

 

With healthy domestic demand and improvement in export in fiscal 2024, Crisil Ratings expects the group to generate blended Ebitda per tonne more than Rs 18,000-20,000 on a sustained basis.

 

• Financial risk profile to remain healthy despite capacity addition: Despite completion of the acquisition of JUSL in fiscal 2023 and 49% stake in an Indonesian JV for NPI smelter facility, the company has a healthy financial risk profile. Despite the last phase of capex and acquisition of JUSL, consolidated net debt stood below Rs 4,000 crore as on March 31, 2024, aided by healthy operating performance. The net debt to Ebitda ratio was 0.8 times while the TOL/TNW ratio was 1.25 times as on March 31,2024, compared with 0.7 time and 1.35 times, respectively, a year earlier.

 

During the first nine months of fiscal 2025, Consolidated Ebitda stood at around Rs. 3,606 crore (Rs. 4,700 crores during FY2024) with net debt to Ebitda ratio at 1.1 times, on a trailing twelve-month basis (0.8 times in fiscal 2024). While Crisil Ratings expects the net debt to ebitda to remain at similar levels by the end of the current fiscal, however, overall debt metrics are expected to remain comfortably below the rating thresholds.

 

Crisil Ratings expects that the company will generate healthy consolidated Ebitda and operating cash accruals on the back of robust domestic demand for stainless steel and efficient operations. Ebitda per tonne is expected to be more than Rs 18,000-20,000 over the medium term, benefiting from healthy utilisation rates, prudent working capital management and improving product mix. This should support the ongoing capex and limit the dependence on external debt.

 

Once completed, the recently announced capex will increase the SS volume capacity of the company to 4.2 MTPA, along with improved forward integration on account of increase share of cold rolling and hot rolling capacities. Crisil Ratings expects JSL’s track record of capacity expansion along with healthy cash accruals from existing operations to fund the capex provides comfort against the project execution risk. However, any material time or cost overrun for the capex, against the expectations, will be key monitorable.

 

The consolidated net debt to Ebitda ratio is expected to remain below 1.5 times (leverage threshold) over the medium term. Any significant debt-funded capex/acquisition, resulting in deviation from this understanding, will be a key rating sensitivity factor.

 

Weaknesses:

• Threat from imports: While the Jindal Stainless group is the largest SS player in India, it faces competition from imports, mainly from China. A sharp rise in imports in fiscal 2020 put pressure on the margins and volumes of domestic players. Imports are likely to be largely limited to the 200 series having application in consumer goods (mainly kitchenware), whereas the group’s focus remains on sectors such as auto, railways and construction, which require 300 and 400 series thereby mitigating the risk to an extent. However, any significant rise in imports can adversely impact realisation and volume of domestic players and hence remains a key monitorable.

 

• Susceptibility to volatility in input cost, and realisation, and cyclicality in the industry: Prices of key raw materials such as SS scrap and finished SS products are largely linked to nickel prices, which tend to be highly volatile. This had led to unfavorable price cycles for the sector in the past. Moreover, as a certain amount of nickel is always maintained as inventory, price fluctuations led to inventory gains or losses in the past and thus, remains a key monitorable. The group has entered a joint venture to develop an NPI plant in Indonesia, which will secure raw material linkages and provide stability to the operating margin.

 

Furthermore, the group has taken several steps to gain the ability to pass on input price increases, including tie-ups with original equipment manufacturers in the automotive, lifts and other industrial segments, with pass-through clauses in contracts. It has also entered volume-based memorandum of understanding (MoUs) with distributors where pricing is set on a periodic basis. However, the ability to pass on the full impact of price hikes will also depend on the underlying demand scenario. As a result, the increase in nickel prices may impact volumes of SS grades with high nickel content as their prices move in tandem. While the group can shift between various grades of SS, impact of volatility in nickel prices on volume will be a key monitorable.

 

During fiscal 2024, the prices of nickel, which forms a crucial raw material for lower grade SS, moderated by around 35%, yet the company was able to sustain the Ebitda per tonne above Rs 21,000 by optimizing around the various grades of SS.

Liquidity: Strong

Crisil Ratings estimates annual consolidated net cash accrual at Rs 3,300 - 3,800 crore in fiscals 2025 and 2026, which will largely cover the planned capex in fiscal 2025 and will be sufficient for fiscal 2026.
 

Liquidity is further supported by cash and equivalent of around Rs 1,672 crore as on December 31, 2024. Healthy cash accrual, absence of any significant term debt obligation over the next two fiscals and unutilized working capital and term loan limit, should comfortably cover the capacity expansion plans and any incremental working capital requirement.

 

ESG profile

The environment, social and governance (ESG) profile of JSL supports its already strong credit risk profile.

 

SS manufacturing has a significant impact on the environment owing to high greenhouse gas (GHG) emissions, waste generation and water consumption. This is because of the energy-intensive manufacturing process and its dependence on natural resources. The sector also has a significant social impact because of its large workforce across operations and value chain partners, and as its operations affect the local community and involve health hazards. JSL is focused on mitigating its environmental and social risks. The company is also working on a strategic roadmap for achieving decarbonization and is evaluating continuous upgrades and retrofits, adoption of clean technologies and strategies to improve ESG performance. 

 

Key ESG highlights

• JSL aims to achieve ~50% reduction in carbon emissions intensity from baseline emissions in fiscal 2022 of ~1.98 tons carbon dioxide equivalent per ton of stainless steel produced by 2035 and achieve net-zero emissions by 2050.
• In FY 22-23, JSL’s recycled content (%) was 60% which means 60% of the company’s raw materials (like SS Scrap, Steel Scrap etc.) are recycled materials which promotes a circular economy).
• In FY 22-23, JSL’s Lost Time Injury Frequency Rate is broadly in line compared to peers (0.37x for employees, and 0.58x for workers). Also, the share of female employees and workers (~3%) are broadly in line as compared to peers.
• Its governance structure is characterized by 50% of its board consisting of independent directors, 30% women board directors, dedicated investor grievance redressal system, and extensive financial disclosures.
• JSL inaugurated its first green hydrogen plant which is India's first such plant in the SS sector with a capacity to generate 90 Nm3 of green hydrogen per hour, aiming to reduce approximately 2,700 tonne in carbon emissions annually.
• JSL has signed an MoU for ~300 MW Inter State Transmission System (ISTS) wind-solar hybrid renewable project for 100MW of round the clock renewable energy supply, both at Hisar and Odisha. It is proposed to have a carbon abatement potential of 435,372 tonnes carbon dioxide every year.
• Also, JSL has an installed capacity of 7.3 MWp floating solar power at Jajpur plant and 4.5 MWp of rooftop solar at Hisar plant. Further, another 28 MWp of rooftop solar plant is under construction to be commissioned in fiscal 2025.
• JSL also has an ESG Governance Structure in place which monitors the ESG performance of the company.
   

JSL’s commitment to ESG principles will play a key role in enhancing stakeholder confidence, given the sizeable share of market borrowing in its overall debt and access to both domestic and foreign capital markets.

Outlook: Stable

JSL is likely to sustain its healthy operating performance over the medium term, aided by healthy demand for SS, focus on high-margin segments, increased capacities and synergies arising from its recent acquisitions. Absence of any significant debt-funded capex or acquisition and healthy cash flow should help sustain healthy financial risk profile over the medium term

Rating sensitivity factors

Upward factors:

• Sustained improvement in operating profitability supported by higher-than-expected operating rates, along with consolidated Ebitda per tonne of more than Rs 23,000 on continued basis
• Higher-than-expected free cash generation supporting improved credit profile with gearing (ratio of TOL/ANW) below 1.0 time and net debt/Ebitda ratio lower than 1.5 times on sustained basis
• Timely commissioning and ramp up of ongoing capex without any cost overrun resulting in increase in scale of operations in terms of operating revenue and operating cash accruals from current levels

 

Downward factors:

• Weakening of profitability, with consolidated Ebitda per tonne lower than Rs 18,000 on a sustained basis
• Lower-than-expected cash accrual or significant debt-funded capex or acquisition resulting in higher-than-expected gearing or consolidated net debt/Ebitda ratio higher than 1.5 times on sustained basis

About the Company

JSL, a listed entity, is one of the largest SS manufacturers in India, with steel melting capacity of 3 MTPA (0.8MTPA in Hisar and 2.2 MTPA in Jajpur) and further ramping up to reach 4.2 MTPA. Its plant in Jajpur is supported by a captive power plant of 264 MW, ferroalloy plant of 0.25 MTPA, CRAP plant of 1.45 MTPA and HRAP capacity of 1.9 MTPA. Operations are also supported by a 3.9-MTPA hot strip mill (HSM), including recent expansion by JUSL (100% owned by JSL currently). JUSL converts SS slabs produced by JSL into hot-rolled coils.

 

JSHL, (merged with JSL effective March 02, 2023) has a 0.8 MTPA SS plant in Hisar. It procures ferrochrome from JSL as well as from the open market. Its plant is the largest manufacturer of SS blades, used in razors, globally. The company also manufacturers various grades of specialty SS products.

Key Financial Indicators (JSL consolidated; Crisil Ratings-adjusted numbers)

As on / for the period ended March 31	Unit	2024	2023
Operating income	Rs crore	38,562	35,697
Adjusted profit after tax (PAT)	Rs crore	2,693	2,084
Adjusted PAT margin	%	7.00	5.8
Adjusted debt/adjusted networth	Times	0.45	0.35
Interest coverage	Times	8.5	11.1

During the first nine months of fiscal 2025, the company has reported a consolidated operating income of Rs. 29,114 crore and PAT of 1,910 crore (vis a vis Rs. 29,108 crore and Rs. 2,193 crore during the corresponding period last year).

Any other information: Not Applicable

Annexure - List of Entities Consolidated

Name of the entity	Extent of consolidation	Rationale for consolidation
Jindal Stainless Ltd*	Full	Subsidiaries
PT Jindal Stainless Indonesia	Full
JSL Group Holdings Pte Ltd	Full
Iberjindal SL	Full
Jindal United Steel Ltd	Full
Jindal Stainless FZE	Full
Jindal Stainless Park Ltd	Full
Jindal Stainless Steelway Ltd	Full
Jindal Lifestyle Ltd	Full
Green Delhi BQS Ltd	Full
JSL Logistics Ltd	Full
Jindal Strategic Systems Ltd	Full
JSL Super Steel Ltd	Full
Sungai Lestari Investment Ltd	Full
Rabirun Vinimay Private Ltd	Full
Chromeni Steel Ltd	Full
Evergreat International Investment Pte. Ltd	Full
Sulawesi Nickel Processing Industries Holding Pte. Ltd	Full

*JSHL, JSL Lifestyle Ltd (railway division), JSL Media Ltd and JSCMS were merged with JSL on March 2, 2023