Will JSW Go Green or Go Home?
Our aim through TVS Weekly is to break down financial stories and concepts simply, explaining what happened and why it matters to you.
No Jargon, no drama! Just stuff that actually makes sense.
Curious? Get more from us on our Instagram, WhatsApp, LinkedIn or YouTube. Our 960k+ family awaits you!
In this week’s newsletter, we’ll learn:
How JSW turned a carbon bullet into a ₹60,000 Cr idea.
How to use ROIIC?
Market Kya Keh Raha Hai Sir?
JSW Steel is investing ₹60,000 Cr near Mumbai to make its steel manufacturing greener. But this isn’t ordinary capex, it's survival!
To survive a carbon tax bullet, the European Union (EU) targeted China but also hit India.
Let’s break down the backdrop, the global twists, and why this might set the stage for India to become the world’s next steel powerhouse.
Carbon Bullet?
In 2023, the EU launched the Carbon Border Adjustment Mechanism (CBAM), the world’s first system to impose CO₂ emission tariffs on imported steel.
While its core aim was to help the EU decarbonise its imports, in practice, it pushed global producers to shift from fossil fuels to cleaner alternatives like hydrogen.
Why did the EU choose this path?
The EU's CBAM responds to dual pressures:
EU’s Decarbonisation Goal
CBAM was born out of the EU’s Green Deal, which targets a climate-neutral Europe by 2050. Climate isn’t just a goal, but it’s a top priority for the EU. With the steel sector being its largest industrial emitter, it became a clear focus area.
The EU already enforces strict carbon regulations on domestic steelmakers, but imported steel faced no such burden, creating an uneven playing field.
CBAM was introduced to fix this imbalance, ensuring that imported steel reflects the same carbon cost as locally produced steel.
The China Problem
China dominates global steel, & the EU has a China problem. China’s aggressive steel dumping, often below production costs, has caused severe competitive disruption for European steelmakers.
This oversupply makes the continuing production of European steel unsustainable.
The EU can't even implement direct tariffs against China, as doing so would violate WTO rules. The rule states that targeted tariffs to discriminate against a country are illegal.
Hence, the EU cleverly uses environmental justifications provided by CBAM.
This approach tackles environmental concerns, aligns with consumer preferences, and addresses competitive imbalances without violating global trade norms.
Why does CBAM matter so much in India?
CBAM poses severe challenges for India's steel firms. Decarbonising or going green isn’t quick or cheap. Innovation and factories take time.
Further, India’s high carbon emissions intensity and coal dependence threaten to make steel exports significantly costlier. This is because steel is a commodity in a hyper-competitive market.
Indian steel getting more expensive could reduce demand for it as EU buyers move towards other cheaper alternatives.
JSW Steel goes green
JSW Steel, India's largest private steel exporter, faced imminent CBAM tariffs from 2026 onwards. The policy would result in a price hike of approximately ₹16,500 per tonne.
To stop this, JSW Steel is investing ₹60,000 crore to expand its existing factory in Salav, Maharashtra. Now, the steel made from this factory will be made with 80% fewer emissions.
To achieve this, the plant will start by using natural gas with a slow transition to hydrogen in its furnaces.
JSW Steel hopes for this investment to add 10 MT per year, increasing its existing production capacity by around 30%. The plan is to scale up production within 3-4 years while remaining aligned closely with the EU’s CBAM implementation.
JSW Group as a whole goes greener
Green steel isn’t JSW’s only play. While upgrading its steel operations, the group is also stepping into future-facing green sectors.
Most notably, it focused on EVs through a ₹27,200 crore investment in its dedicated JSW MG Motors factory last year.
Its goal is to create an integrated ecosystem around clean mobility and now, clean steel.
World eyes India
ArcelorMittal Nippon Steel (AMNS), one of the world’s largest steel manufacturers, sees a big opportunity in India. Over the past five years, India has emerged as the fastest-growing major economy in steel consumption.
Yet, at just 85–90 kg per person, India's per capita steel consumption remains around 40% of the global average. There is major headroom for growth, and there are indications that this growth is about to go green.
Last year, the Indian government defined ‘green steel’ for the first time based on carbon emissions, signalling its intent to decarbonise the steel sector.
Seeing this initiative, AMNS announced a ₹60,000 crore phase-one expansion to meet these green standards.
With players like JSW and AMNS stepping up and policy tailwinds shifting in favour of sustainability, India is gearing itself towards greener practices & greener pastures.
MEME OF THE WEEK:
Dalal Street Dictionary
Ever struggled between dressing sharp in timeless jeans and a tee or going all out with bold designer streetwear?
Investors face a similar dilemma, not with clothes, but with capital.
Imagine two companies. Both have solid track records. Company A now wants to launch a bold, high-risk product line.
Company B, meanwhile, is sticking to a steady, low-risk expansion. Who do you bet on?
To answer that, investors use a metric called ROIIC, or Return on Incremental Invested Capital. This metric shows how efficiently new investments turn into profit.
Here’s the formula:
When you try a new outfit, you’re predicting how people will react based on your previous fashion hits. ROIIC works similarly.
It doesn’t predict the future, but by focusing on recent reinvestments, it gives relatively fresher clues on how well a company is scaling.
Some businesses naturally show higher ROIICs because of how reinvestment works in their industry. For instance, FMCG brands already have customer trust and distribution, so even small investments can scale profitably.
In contrast, capital-heavy sectors like cement or steel often need large reinvestments just to maintain operations, which can drag ROIIC down. So ROIIC works best when comparing companies within the same sector.
But, how is this useful in markets?
Warren Buffett summed it up best in 1992:
“The best business to own is one that can employ large amounts of incremental capital at very high returns.”
That’s what ROIIC may reveal. It gives clues to investors to filter not just which businesses have grown well, but which ones may deserve more capital going forward.
For instance, ITC’s bets on low-margin sectors like hotels or paper often drag ROIIC down, while Birla’s entries into high-margin plays like paints (Birla Opus) or jewellery (Indriya) push it up.
It’s not past success, it’s future capital efficiency.
What More Caught My Eye?
HUL’s big move away from soaps.
Why are investors upset with Trent?
Beautiful vs Practical Advice.
Buffett on Tariffs in 2003.
Does Warren Buffett Think EBITDA Is Overrated?
Recommendations
This week, I recommend watching a lecture by Peter Bernstein, a legendary economist and educator. In it, he discusses the evolution of capital market theories from their Ivy League roots to real-world implementation.
A must-watch for anyone who wants to understand how modern investment thinking was born.
Thanks for reading this weekend’s newsletter. I’d like to know your thoughts, so please feel free to comment below. Your feedback helps us improve!
And don’t forget to like, share, and restack!
Song of the Week:
This is Parth Verma,
Signing off.
Very nice , very informative thanks for it , but sir ROIIC pe detailed discussion would be better.