Jindal Steel to have a CEO after five years as Gautam Malhotra is elevated

Jindal Steel Ltd, owned by billionaire Naveen Jindal, on Tuesday appointed Gautam Malhotra as chief executive officer and reported below-expected second-quarter profit.

Malhotra, who joined the company in May 2024, has been appointed CEO effective October 28, the company said in an exchange filing alongside its September quarter earnings statement. Malhotra has since worked across the steelmaker’s mining, manufacturing, HR, logistics, technology, AI adoption and sales sectors.

Since joining, he has been involved in the company’s commercial and logistics strategy.

Malhotra comes from outside the steel industry and is a former entrepreneur and operations professional. Before joining the company, he founded FuelBuddy, a doorstep fuel delivery company that now operates in five countries.

According to Satyadeep Jain, chief analyst of cement, metals, mining and utilities at Ambit Capital, the new CEO’s skills will be monitored given that he does not come from a steel industry background.

The appointment comes almost five years after the company’s previous CEO Sudhanshu Saraf resigned in 2020. Following Saraf’s resignation, Bmlendra Jha joined the company as managing director in 2022 and left in 2024.

2nd quarter profit, realizations decreased

Jindal Steel reported net profit attributable to equity holders. ₹638 crore in the second quarter, down nearly 26% year-on-year and 58% sequentially, according to stock exchange filings. Profit missed the average ₹697 crore estimated by 14 analysts surveyed Bloomberg.

The company’s revenue from operations fell 5% compared to the June quarter. ₹11,686 crore, mainly due to weak realizations and low volumes.

“Roughly 3.4% of the decline was due to lower realizations in line with the decline in steel prices during the quarter, while the remaining 1.6% was due to weak volumes,” said Parthiv Jhonsa, vice president of Anand Rathi Institutional Equities. “It’s a mix of both price and volume pressures.”

The steelmaker’s production fell 5% sequentially to 2 million tonnes, while sales fell 2% to 1.87 MT.

Long steel product prices fell 14.5% sequentially in the September quarter, falling to roughly the same level. ₹48,000 per tonne, according to the October 7 Anand Rathi report. In its note dated October 8, Elara Capital stated that the decline was sharper than the decline in flat products used in automobiles and consumer goods due to the seasonal slowdown in the construction sector, accelerated by the reduction in the GST rate on cement.

Jindal Steel’s earnings before interest, tax, depreciation and amortization (or Ebitda, a measure of operating income) also fell by about 31% sequentially. ₹2,081 crore.

Jhonsa reported that despite the slight decline in raw material costs, high personnel costs and other expenses affected Ebitda.

The second quarter is a seasonally weak period as it coincides with the monsoon rains, when construction activities slow down and demand for steel decreases.

Ambit Capital’s Jain said the decline in net profit was due to an exceptionally weak quarter in the long products segment, where profitability contracted sharply due to weak demand and sharp fall in prices due to additional supply.

Jain said long steel margins have narrowed sharply with losses from secondary players in the value chain. Current spreads are unlikely to be sustainable for a long time because they may require some supply disruptions, he said, adding that these have historically been bottom spreads for the industry.

Jindal Steel is more active in the construction sector compared to its peers, and approximately 60% of its production consists of long products such as rebar and rails. Rebars are embedded in concrete to increase strength and structural stability in buildings.

Earlier this month, JSW Steel Ltd, led by Naveen Jindal’s brother Sajjan Jindal, also reported a sequential fall of nearly 26% in net profit. ₹1,623 crore for the September quarter, reflecting broader industry sentiment.

JSW Steel has a larger presence in flat steel, which has outperformed long products and reported higher volumes, helping offset price softness in the September quarter.

Tata Steel Ltd is yet to announce its second quarter results.

This quarter, Jindal Steel commissioned a new blast furnace at Angul, doubling the plant’s hot metal capacity from 4.25 mtpa to 8.85 million tonnes per annum (mtpa). It has also commenced operations of a new 3 mtpa basic oxygen furnace at Angul, taking its crude steel capacity to 9 mtpa and the company’s total capacity to 12.6 mtpa.

Now, with both units working together, Angul remains on track to achieve 12 mtp per annum, taking Jindal Steel’s total capacity to 15.6 mtp by the end of this financial year. Other projects are progressing as planned.

Shares of Jindal Steel ended 3.93% higher compared to a 0.18% decline in the benchmark Sensex ahead of earnings announced after market hours.