In an interview to ET Now, Sajjan Jindal, Chairman & Managing Director of JSW Group, talks about the upcoming GST regime and how newer tax rates will reshape the domestic economy. Edited Excerpts:
One day we have to take this decision if we want to move forward and we want to modernise our economy and reduce our number of tax systems and create a ease of doing business then we have to take such kind of decisions. There will be some pain the short term but over a long term of period I think GST is going to be a game changer.
But too many tax slabs, complicated calculations on input credit, anti-profiteering clause, I mean is this desirable form of GST?
As I said that everyone is learning, everyone is trying to bring as simple a solution as close to the old regime so that you do not get into a very simplistic situation so I think these will get sorted out over a period of time.
What is your take on the anti-profiteering clause because many say that NAPA has been given too much passé, it is a sort of a super cop that you are creating do you agree with that assessment?
I agree in a way that idea of GST is not to give any more profit to anyone, basically the idea of GST is that it should be passed on to the customer so that the inflation comes down and or is under check and government earnings little bit more revenue and there is a more simplistic form of ease of doing business and there is a more wider tax net where everybody large to small to medium everyone comes into that tax bracket that is the basic idea of GST. Now if because of that somebody gets benefit and tries to profiteer then I think we need to control that. In India everybody tries to find a short cut or tries to find another way of making more money so you need to bring in some check and balance.
During the transition what kind of disruptions that you expect over the next two-three months?
Sajjan Jindal: I do not think there is going to be any major disruptions.
As far as JSW Group is concerned what is the kind of impact that GST will have on two of your critical sectors steel and energy?
I have not looked into great depth but what I have been told is that in steel there will be some cost reductions because of the input credits and CST which will go away so we will benefits little bit on that and therefore the prices will come down a little bit. On energy there would not be much of an effect.
Policy paralysis may be a thing of the past but we are not seeing any bounce backs for the economy, why do you think the industry is so reluctant to invest?
Today if you see majority of the Indian corporate sector is saddled with huge debt and good companies are also now little bit worried to reinvest because they are seeing that there are companies with huge capacities and huge debt and the banking system is today kind of a comatose situation, they are not able to take decisions and so these companies laden with big debt is lying out there and the banks are not able to decide and people like us who have got better balance sheet and want to invest but is waiting whether these capacities which are there whether they will operate or not operate so we are waiting and seeing before we take a decision to invest.
But looking at the capacity utilisation how long will it take before the industry starts investing and how bigger role is the interest rates playing in this overall scenario?
So interest rates create more demand if lower interest rates are there then there is a more demand in the housing sector, in the consumer durable and sectors so people if EMI drops then people get in…
Industry is also not comfortable with the hawkish stance of the Reserve Bank?
Sajjan Jindal: Basically what we need is that quick decision making to resolve all the pending matters especially in the banking but it is not easy because the debt is huge and write offs are huge.
Turning to steel which is one of your core businesses I mean many in the amongst the brokerage community believe that the sector is right for a rerating are we at a stage where things could only get better?
So it is very difficult to generalise it but in steel what has happened is that if you see the good companies in India have done quite well and most of the other companies have not done well because of the leveraging and whoever has been conservative or more prudent in their expansions and their investments they have done well. So therefore whether the whole sector should get rerated I am not sure but the companies which have done well, which have got good management, which has got good way of managing things they must get rerated.
In fact turning to the government’s crackdown on NPAs do you think this bank sponsor takeovers and M&As do you think it will work?
Sajjan Jindal: Banks will have to take a hard decision, banks must not have the fear of unknown. They have to go with…their interest should be paramount, banks must have their own interest paramount and that is how they should take decisions.
In fact if I turn to the dirty dozen five out of 12 companies are from the steel sector does it throw up a big opportunity for a company like JSW Steel?
Sajjan Jindal: I mean JSW Steel is always open to the idea of consolidation and we believe that so many steel companies in one country it is very difficult to sustain or to survive so there will be consolidation. But whether these five companies will throw up an opportunity we have to go into the details and check it out.
But would you be ready to play a white knight for companies like Bhushan Steel or Monnet?
If it suits our balance sheet and if it suits our product mix and if it suits our calculations and if we find that it will be a good value accretive acquisition then we will certainly look at it but we will not look at it from a white night perspective. It must suit JSW and JSW shareholders for value accretive.
Coming to your global plans you have also raised your bid for a plant in Italy, IlvagoingC forward?
So yes we are looking at a global acquisitions they are more in the opportunistic nature if there is an opportunity and we feel we getting it at a low price and we can add value, our management can play a interesting role there those kind of assets we are open to look at. Ilva was one of those kind of assets of course we lost that bid but those kind of assets we will continue to look at.
Turning to JSW Energy do you think the operating performance there has bottomed out?
I think so right now the power sector is in very difficult situation because there has been a lot of large capacity which was built up in the last 10 years and much more than what India needed the capacity got build up. In the meantime two things have happened one is large capacity got built up, coal production which was always low has gone up very sharply so that has bridged the gap between the supply and demand for coal so the power plants are producing more. On the other side there is a huge emphasis on energy saving devices or LED lamps and stuff like that so your power consumption is coming down and so therefore there is a huge sort of the prices in the exchange has dropped dramatically what used to be a Rs 6, Rs 5 is now hovering around Rs 2.5 per unit in the power exchanges.
Share with us your plans when it comes to new businesses like electric vehicles?
EV is the way forward for the mobility there is no doubt about it. The earlier we understand the earlier we accept it the better it is for all of us so I do not see a IC engine cars in the internal combustion cars engine cars are going to be made after 2025 or 2030 maximum so therefore it is going to be replaced rapidly by the electric vehicles this is my own perception and lot of people in my organisation and outside share my view. So I thought that this was a great opportunity for us because the whole automobile industry is going through paradigm shift and so why do not I jump in.
SOURCE : ECONOMIC TIMES