Sajjan Jindal's Cloning Factory
t was a night Sajjan Jindal will never forget. It was the first week of October almost 11 years ago. At the age of 38, the second son of industrialist O.P. Jindal was making the biggest bet of his life. He was about to commission a Rs. 4,000 crore integrated steel plant in Vijaynagar in Karnataka. And he had banked on an unknown and untested technology called Corex. Jindal reckoned that the technology was cleaner, used low-grade coal and thus offered higher margins. His peers thought it was suicidal.
Fortune usually does favour the brave. But this one time, it didn’t. The night before the plant was to go on-stream, unseasonal heavy rains lashed the arid region. The coal conveyor stopped working and 200 workers had to manually feed coal to generate enough heat and melt the iron. But by then, the coal had gotten wet — and all efforts to get the plant started hit one technical snag after another. Eventually, the plant had to be shut down.
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Image: Vikas Khot
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Jindal’s Rs. 20,000 crore steel business is the largest in the country, surpassing even Tata Steel | |
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It was a crippling blow. J.K. Tandon, then managing director of Jindal Vijaynagar Steel and one of the directors of the renamed JSW Steel Ltd., was by Jindal’s side at that time. “A man with a lesser heart wouldn’t have been able to stand it.” But Jindal did. He stayed on the site and toiled hard with his engineers, sorting out more than 1,000 snags. It took him six months to restart the plant. Three years later, he commissioned a second Corex plant — which eventually became a case study for steel plants all over the world. J.J. Irani, the former managing director of Tata Steel, would later visit Vijaynagar only to go back and tell his team in Jamshedpur, “Look out for this man; he will be as good as us.”
Irani was right. Seven years later, Jindal’s Rs. 20,000 crore steel business is the largest in the country, surpassing even Tata Steel. But recognition has been slow to come. Maybe it had to do with the fact that with its takeover of Anglo Dutch major Corus, Tata Steel stole a march over JSW Steel and moved into a completely different orbit. Or that Jindal still hasn’t clearly positioned himself in the Mumbai industrialists’ club. Even within his own family, his younger brother Naveen, who runs Jindal Steel and Power (JSPL), has a stronger profile. He’s a Member of Parliament and the media seems to hang on to every word he says.
Sajjan’s stint as Assocham (the Associated Chambers of Commerce and Industry of India) president in 2008 did help, but not enough to be spoken in the same breath as Sunil Mittal, the Adanis or the Ruias. Even the markets haven’t quite given him the thumbs up yet. Though the turnover of Sajjan’s company is double of Naveen’s, JSW Steel’s market value languishes at Rs. 17,000 crore, well behind JSPL’s Rs. 58,000 crore, thanks to the latter’s highly profitable power business and considerable mining assets.
That’s why the next five years are so crucial for Sajjan Jindal. And it isn’t about the fact that he’s set himself a target to double his steel capacity in four years. He’s now begun crafting an ambitious diversification plan to expand into power, ports and infrastructure, cement and aluminium. In the next five years, he’s expecting to touch a turnover of Rs. 60,000 crore. The size of the plan may not give any of his peers’ sleepless nights. But it could change the way the world looks at Sajjan Jindal. Jindal revels in executing huge projects. But such diversification is often a bugbear for most Indian business families.
What Sajjan Jindal is attempting makes intuitive sense: He is drawing from his knowledge of executing large steel projects. It involved setting up a captive power project, a port and even a cement plant. Aluminium, however, is pure opportunism. And he has carefully handpicked a CEO for each business who will drive the expansion. Each of these businesses will be listed locally and if all goes well, the group holding company could even be listed overseas.
These CEOs will have complete autonomy to run their business. Jindal is clear about his own role. “The way we use technology differentiates us from the rest. I like to be in control here. My inner belief is that I should know more than my CEO of that business. When I am discussing technology, I should know everything. There are others to look after the commercial and financial aspects of the business,” he says.
More than just Gut
Jindal started off as a manager, back in 1984 when his father O.P. Jindal put him to test by asking the 25-year-old mechanical engineer to turn around operations at two units near Mumbai. The units were making losses of Rs. 7 crore on revenues of Rs. 10 crore every year. He bet on new technology that saved costs, improved productivity and thus increased margins. It was an expensive gamble, but it paid off.
Over 25 years later, that confidence is apparent. Jindal says he “doesn’t believe in consultants” or “in analysing too much”. But he relies on native wisdom to select, test and push his chief executives. “Our way is to give initial capital and from that capital if he (CEO) keeps generating returns, then he can go expanding,” he says. And Jindal takes care of two key functions — deciding the technology and picking the people who would run it. “If you control these two well, others will follow,” is his mantra.
JSW Energy seems to be among the few companies that has spent enough time in understanding the business before making the big step forward. The power foray began in the early 90s with a joint venture with Belgium’s Tractebel to utilise energy that would come out as by-product from the Corex steel plant and produce electricity. The tie-up with the global power service provider was a godsend.
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