Operating profit margin has jumped from 25.46% to 44.51%, leading to 205.67% rise in operating profit to Rs 5,287.49 crore. Raw material cost as a % of total sales (net of stock adjustments) decreased from 28.63% to 21.43%. Purchase of finished goods cost rose from 0.67% to 1.52%. Employee cost decreased from 3.44% to 1.81%. Other expenses fell from 43.05% to 31.53%. Cost of Sales fell from 24.40% to 21.15%. Inventories cost fell from 4.89% to 1.80%.

Other income fell 6.40% to Rs 22.98 crore. Profit before interest, tax and other unallocable items (PBIT) has jumped 204.14% to Rs 4,907.50 crore. PBIT of Iron & Steel segment rose 324.01% to Rs 4,326.55 crore (accounting for 88.16% of total PBIT). PBIT of Power segment rose 217.89% to Rs 498.80 crore (accounting for 10.16% of total PBIT). PBIT of Others segment fell 81.17% to Rs 82.15 crore (accounting for 1.67% of total PBIT).

PBIT margin of Iron & Steel segment rose from 17.67% to 42.27%. PBIT margin of Power segment rose from 9.21% to 23.14%. PBIT margin of Others segment fell from 297.58% to 23.64%. Overall PBIT margin rose from 21.16% to 38.52%.

Provision for interest fell 27.74% to Rs 642.97 crore. Provision for depreciation rose 30.57% to Rs 846.83 crore. Profit before tax grew stood at Rs 3,820.67 crore compared to Rs 216.08 crore. The company reported EO expense of Rs 969.04 crore (Rs 126.96 crore towards provision against investment in mining assets, Rs 724.21 crore towards provision against diminution in value investment in 3 step-down subsidiaries by a subsidiary JPL (Hydro Projects), Rs 109.74 crore towards impairment of investment made in one of the subsidiary M/s Kineta Power Limited (‘KPL'), Rs 8.13 crore towards provision against property, plant & equipment in KPL) compared to EO expense of Rs 109.39 crore representing advances and CWIP written off of a subsidiary Kineta Power. PBT after EO was Rs 2851.63 crore compared to Rs 106.39 crore.

Provision for tax was expense of Rs 951.12 crore, compared to Rs 24.56 crore. Effective tax rate was 33.35% compared to 23.02%.Minority interest increased 32.67% to Rs -67.73 crore. Net profit attributable to owners of the company increased 977.19% to Rs 1,968.24 crore.

FY21 consolidated performance

Net sales (including other operating income) of Jindal Steel & Power has increased 27.98% to Rs 38988.63 crore. Sales of Iron & Steel segment has gone up 29.70% to Rs 33,069.29 crore (accounting for 78.23% of total sales). Sales of Power segment has gone up 9.94% to Rs 7,536.84 crore (accounting for 17.83% of total sales). Sales of Others segment rose 39.48% to Rs 1,664.76 crore (accounting for 3.94% of total sales). Inter-segment sales rose Rs 3,080.82 crore to Rs 3,282.26 crore.

Operating profit margin has jumped from 22.37% to 37.05%, leading to 111.96% rise in operating profit to Rs 14,444.25 crore. Raw material cost as a % of total sales (net of stock adjustments) decreased from 35.25% to 23.91%. Purchase of finished goods cost rose from 1.87% to 3.20%. Employee cost decreased from 2.98% to 2.32%. Other expenses fell from 37.63% to 33.33%. Cost of Sales fell from 36.62% to 27.65%. Inventories cost rose from 0.51% to 0.55%.

Other income rose 1,953.81% to Rs 538.92 crore. Profit before interest, tax and other unallocable items (PBIT) has jumped 180.65% to Rs 12,387.23 crore. PBIT of Iron & Steel segment rose 225.55% to Rs 10,637.17 crore (accounting for 85.87% of total PBIT). PBIT of Power segment rose 143.63% to Rs 1,429.28 crore (accounting for 11.54% of total PBIT). PBIT of Others segment fell 42.69% to Rs 320.78 crore (accounting for 2.59% of total PBIT).

PBIT margin of Iron & Steel segment rose from 12.82% to 32.17%. PBIT margin of Power segment rose from 8.56% to 18.96%. PBIT margin of Others segment fell from 46.90% to 19.27%. Overall PBIT margin rose from 13.16% to 29.30%.

Provision for interest fell 17.90% to Rs 3093.33 crore. Loan funds declined from Rs 30,675.40 crore as of 31 March 2020 to Rs 21,551.20 crore as of 31 March 2021. Inventories declined from Rs 6,368.71 crore as of 31 March 2020 to Rs 5,942.57 crore as of 31 March 2021. Sundry debtors were lower at Rs 2,794.40 crore as of 31 March 2021 compared to Rs 3,549.26 crore as of 31 March 2020. Cash and bank balance rose to Rs 6,152.22 crore as of 31 March 2021 from Rs 906.23 crore as of 31 March 2020. Investments rose to Rs 1,155.54 crore as of 31 March 2021 from Rs 180.59 crore as of 31 March 2020 .

Provision for depreciation rose 0.71% to Rs 3453.34 crore. Fixed assets declined from Rs 71,897.32 crore as of 31 March 2020 to Rs 55,561.11 crore as of 31 March 2021. Intangible assets declined from Rs 609.82 crore to Rs 500.10 crore.

Profit before tax grew stood at Rs 8436.5 crore compared to loss of Rs 355.85 crore. The company reported EO expense of Rs 1140.86 crore (Rs 298.77 crore towards provision against investment in mining assets, Rs 724.21 crore towards provision against diminution in value investment in 3 step-down subsidiaries by a subsidiary JPL (Hydro Projects), Rs 109.74 crore towards impairment of investment made in one of the subsidiary M/s Kineta Power Limited (‘KPL'), Rs 8.13 crore towards provision against property, plant & equipment in KPL) compared to EO income of Rs 64.6 crore. PBT after EO was Rs 2851.63 crore compared to Rs 106.39 crore

Provision for tax was expense of Rs 1,768.71 crore, compared to Rs 108.45 crore. Effective tax rate was 24.24% compared to negative 37.24%. Consolidated PAT not only turned positive after posting a loss for the past 6 years, but also hit an all-time high of INR 5,527 crore.

Promoters' stake was 60.47% as of 31 March 2021 compared to 60.48% as of 31 March 2020. Promoters pledged stake was 41.65% as of 31 March 2021 compared to 74.80% as of 31 March 2020.

Cash flow from operating activities increased to Rs 11,960.93 crore for year ended March 2021 from Rs 8,814.32 crore for year ended March 2020. Cash flow used in acquiring fixed assets during the year ended March 2021 stood at Rs 858.11 crore, compared to Rs 1,540.28 crore during the year ended March 2020.

JSPL recently proposed divestment of JPL to Worldone Private Ltd for an all cash equity value consideration of Rs 3,015 crore. Post JPL divestment, JSPL will transform into a pure play steel company with all its operations in India - one of the highest growth economies globally. The divestment will significantly help JSPL reduce emissions improving ESG score, strengthen its balance sheet via debt reduction, shift entire management focus on company's strong domestic steel business and improve return ratio's for investors as it progress towards becoming a Net Debt free company. The proposed Sale is subject to necessary approvals of shareholders of the Company, regulatory approvals, approvals from lenders of the Company and Target Company, contractual approvals and such other approvals, consents, permissions and sanctions as may be necessary in line with extant relevant guidelines. The long stop date for completion of the Proposed Sale is 12 months.

Outlook by the company

Structural changes in China to curb steel exports (removal of export rebate), strong focus on reducing carbon emissions and ongoing geopolitical tensions are likely to provide continued support to current steel upcycle, in our view. India however is currently facing threat from the ongoing second wave of Covid-19, which has turned out to be much severe compared to earlier wave. JSPL remains committed to prioritising human lives in these challenging times and has been diverting oxygen supply to various states (daily run rate has been increased to 120 tonnes recently from 100 tonnes). JSPL is providing Liquid Medical Oxygen to the states of Telangana, Maharashtra, Andhra Pradesh, Gujarat, Odisha, Chhattisgarh, Madhya Pradesh, Delhi and Haryana. While slowdown in construction activities within the country and diversion of oxygen supply has resulted in lower production and sales recently, strong export markets due to change in Chinese policies and ongoing vaccination drive involving country's broader population bode well for steel demand and pricing outlook in FY22 and beyond.

Outlook for Indian steel producers has turned extremely bright in the past year and JSPL's decision to divest power assets (JPL) is in line with our renewed strategy to focus on the company's promising India Steel operations.

The scrip is currently trading at Rs 456