JSW Steel Announces IPO Offering

Nov. 17 (Bloomberg) -- JSW Steel Ltd., India’s third- largest steelmaker, expects to open the initial public offering of its energy business next month, valuing the unit at about 200 billion rupees ($4.3 billion).
JSW Energy Ltd. aims to sell a stake of as much as 15 percent to raise 30 billion rupees, Managing Director Sajjan Jindal said in an interview in Mumbai. JSW Energy’s capacity may rise to 3,140 megawatts next year and about 11,350 megawatts in the following five years from 1,000 megawatts now, he said.
“JSW’s power plants are already operational and by September next year the capacity will rise, which is an advantage,” said Alex K. Mathews, the head of equity research at brokerage Geojit BNP Paribas Financial Services Ltd.
Power companies in India raised more than $2 billion in IPOs this financial year as investors bet on Prime Minister Manmohan Singh’s plan to almost double generation capacity in the five years to March 2012. Singh’s administration has pledged to spend 569.6 billion rupees to add power plants and transmission lines this financial year.
JSW Steel shares rose as much as 2.6 percent to 948.70 rupees, the highest price in the past year. They traded at 929.80 rupees, up 0.6 percent, as of 12:15 p.m. in Mumbai. The benchmark Sensitive Index declined 0.6 percent.
Generation, Transmission
JSW Energy plans to use 21.3 billion rupees of the IPO proceeds to add 2,790 megawatts of capacity, build a 169- kilometer (105 mile) transmission line and develop a lignite mine in the northern state of Rajasthan, according to documents filed with India’s market regulator. About 4.75 billion rupees will be used to repay debt.
“There are many companies selling shares, but investors will look at those that have already begun production,” Jindal said yesterday. JSW Energy runs facilities in the northwestern state of Rajasthan and in the southern state of Karnataka.
The sale is being managed by JM Financial Consultants, Kotak Mahindra Capital Co., ICICI Securities Ltd., IDFC-SSKI Ltd, J.P. Morgan India Pvt., SBI Capital Markets Ltd., Morgan Stanley India Ltd. and IDBI Capital Market Services Ltd.
Coal Mine Expansion
India, the world’s second fastest-growing major economy, faces peak-hour shortages of 12.6 percent this year, according to the Central Electricity Authority. The government plans to add 78,700 megawatts of capacity in the five years to March 2012 and 100,000 megawatts in the following five years.
Separately, JSW Steel may spend $500 million buying coal mines in nations including Australia and South Africa to secure supplies for its local expansion, Jindal said.
Indian steel demand is expected to grow by about 10 percent in the second half of this financial year. JSW Steel is looking at new locations after failing to find coking coal at its exploration project in Mozambique.
The company plans to raise capacity by more than 33 percent to 10 million metric tons at its Vijayanagar plant in South India by 2011 as demand from customers including Larsen & Toubro Ltd. and GMR Group increases, Jindal said. Later, JSW Steel aims to build a mill in West Bengal state with an initial 3 million ton capacity, he said.