Posted on 27 Oct 2015
After unbundling family
cross-holdings between his three brothers, Sajjan Jindal, the billionaire owner
of JSW Group, plans to restructure the ownership structure to make it simpler
and transparent while allowing his only son Parth to chart his own growth path
before he inherits the diversified steel-to-power conglomerate.
The group will also look at listing
Jindal's private cement company and roping in a strategic investor in ports
business.
"We have four holding companies through which we hold the entire group. We
would like to simplify and remove the entire cross-holdings and the web around
and make it simple, clean and straightforward," Jindal, 55, told ET in an
interview. "My team is working on the structure. There shouldn't be any
confusion in the structure."
A simpler holding structure helps
the promoters list, spin-off or sell group companies, a global consultant said
on condition of anonymity. "It also makes succession planning much
easier," the consultant said.
The Jindal family has already done away with the cross-holdings in the four
companies owned by the four brothers. Earlier the four brothers owned a stake
in each of the companies managed by them as part of a will created by their
late father OP Jindal 20 days before he died in a copter crash to keep his sons
together. Each brother owned one-fifth of the shares held by the promoters in
individual group companies along with their mother Savithri Devi. "Crossholdings
among brothers are more or less unbundled. It is clear and transparent
now," said Jindal.
ET had on June 9 first reported that the brothers planned to unbundle the filial cross-holdings. The eldest brother Prithviraj Jindal owns Jindal Saw, Naveen Jindal Steel and Power, and the younger Rattan Jindal owns Jindal Stainless Steel.
"My three brothers will
continue to be investors in our group like any other ordinary
shareholder," said Jindal, who built one of the fastest diversified
conglomerates in the past 15 years after his flagship JSW Steel was bogged down
by heavy debt in 1998 as steel prices tumbled. "They (the three brothers)
can sell shares to anyone they like...if I decline the offer to buy it,"
he said. Jindal, who built his business through acquisitions in India and
abroad to become India's largest steel maker, said it was a mistake to buy a
steel pipe making plant in the US and mines in Chile and Mozambique. "Our
overseas buys have not reaped benefits as we planned," he said. "We
had to write off $15 million invested in Mozambique."
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The purchase of three US pipe and
plate mills from elder brother Prithviraj for Rs 3,690 crore has not fared
well. "We are now inward looking. Even if we invest in a small plant
overseas it takes a lot of our top management time. If I had not invested
abroad I would have had 25-30 mt steel capacity by now," he said.
"The government is proactive and understands that if we don't support the
steel industry...China is out there to destroy us with cheaper imports."
Jindal now wants to more than double the group's steel capacity to 40 mt by
2025, hike power generating capacity to 10,000 MW and cement to 17 mt before he
takes it public.
"He has proven sceptics wrong time and again. His steel business surpassed
Tata Steel India and SAIL in terms of capacity despite having no raw material
of its own," said Goutam Chakraborty, metals analyst at Emkay Global.
But Jindal isn't yet attracted to
the ecommerce boom and is leaving the job of experimenting with new ideas to
son Parth, 25, who will graduate from Harvard Business School in 2016. He said
he may look at starting an ecommerce portal for steel products but remains
sceptical of its success. "Looking from a distance it is an amazing thing.
But we are not cut out for that. Parth could do whatever he wants," he
said.
Parth Jindal has already formed a Rs
100-crore venture capital fund to invest in tech startups.
But even as the group spreads its
wings across different sectors Jindal's first love will be steel despite
volatile commodity cycles. "We will grow group businesses, but the kick I
get from steel is different. I am an engineer and I like it," said Jindal.
Jindal is clear that he will continue to run the group for another few decades at least and his son will have to carve out his own destiny. "I am not old. I am going to run the group for 20-30 years. Parth is not going to get anything. He has to chalk out his own path," he said.
