The turnaround story of Monnet Ispat and Energy

Monnet Ispat and Energy Ltd, renamed as JSW Ispat Special Products Ltd after its takeover by JSW Steel and AION Investments through a Corporate Insolvency Resolution Process (CIRP), saw first signs of a turnaround when it posted highest quarterly EBITDA in the October-December 2020 quarter post-takeover by the consortium.

The company posted an EBIDTA of Rs 86 crore compared to negative EBIDTA posted in the previous quarters. The company also posted a net profit of Rs 29.5 crore (excluding exceptional items) for the first time since the takeover.

Quarterly earnings of Monnet Ispat and Energy

Despite the spread of Covid-19 and the resultant lockdown in the first half 2020, Monnet Ispat and Energy continued to show signs of a turnaround. The lockdown forced the company to shut down its manufacturing facilities at Raigarh and Raipur on 25 March 2020 following countrywide lockdown due to COVID-19. With easing of some restrictions, the Company restarted the integrated steel making operations at the Raigarh plant with effect from 2 May, 2020 and at Raipur plant from 16 May 2020.

Nonetheless, Monnet Ispat continued to show improved performance. It posted Rs 1,163 crore revenue in the October-December 2020 quarter, which was 98% higher than what it had achieved a year ago (Rs 587.5 crore). It also posted a net profit from operations of Rs 29.5 crore, after several quarters.

In the nine-month period to December 2020, the company posted a 35% increase in gross sales compared to the same period previous year, while losses from operations halved to Rs 188 crore.

The turnaround story

In August 2018, Monnet Ispat & Energy Limited was acquired jointly by a consortium of Aion Investments Private Limited (AION) and JSW Steel Limited after a year-long CIRP process. The consortium paid Rs 3,000 crore to the bankers against their total claims of Rs 11,000 crore.

After the completion of the acquisition in August 2018, the new promoters restarted operations in Raigrah, which was shut for over four years.

In March 2019, the promoters restarted TMT operations and introduced JSW Neosteel brand under licensing arrangement. Before the acquisition, Monnet Ispat and Energy Ltd had a production capacity at Raigarh of 1.5 MTPA to produce HR plates, rebars and structure profiles.

The new promoters implemented an expansion project of pellet plant from 1.5 MTPA to 2 MTPA in the second quarter of 2019-20. The company refurbished blast furnace, SMS and oxygen plant to bolster operations. It also embarked on transforming the Raigarh unit to focus on special grades of alloy steel catering to auto and export markets.

In his message to shareholders in the company annual report, Chairman Jyotin Mehta said that they undertook debottlenecking and upgradation of all steel manufacturing facilities, including the modernisation of the pelletisation plant at Raigarh during 2019-20.

He also said that the company was looking at increasing the pellet capacity from 2.20 MTPA to 2.50 MTPA, which will facilitate better economies of scale and higher sales volumes, led by higher production.

Employees and staff

As on 31 March 2020, the company had 2,255 direct employees, apart from a strong base of contract workforce. The number of direct employees in 2018-19 was 2,295 and 2110 in 2017-18. The employee benefit expenses in 2019-20 increased from 30% from Rs 89 crore to Rs 116 Crore, which the company attributes to increase in number of employees.

The percentage increase in the median remuneration of employees in 2019-20 was 21.15%. For calculating median employee remuneration employees who were in employment for the whole of the financial year 2019-2020 are considered.

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In 2019-20, average increase in the remuneration of employees excluding managerial personnel, was 10.53% and 9.25% for managerial personnel which includes Whole-time (Executive) Director. In previous year, there was no increase in the remuneration for any employees during the financial year under review.

The remuneration of employees excluding managerial personnel in 2017-18 saw a decline on an average by 22%. No remuneration were paid to managerial personnel in 2017-18

Synergies and plans for future

Monnet Ispat and Energy is synergizing with JSW Steel to improve efficiency, funding requirement and access large vendor base. It is also using JSW Steel’s Neosteel brand to reach out to newer markets.

The company is now focusing on special steel production capabilities and looking forward to exports and collaborating with Original Equipment Manufacturers (OEMs) in future. The company also looks to concentrate on TMT sales to OEMs and the retail sector, besides exporting special billets, pellets and sponge iron.

Monnet Ispat and Energy would look to capitalize on improved domestic and global consumption of steel. The fact that it is part of JSW Steel, it would help it recover from the shocks of Covid-19 lockdown better than many other small players.

However, the turnaround story will be complete only when it consistently posts revenue and earnings growth in the future. So far, the turnaround of Monnet Ispat and Energy looks like on course.