Under Naveen Jindal’s leadership, Jindal Steel & Power has grown from a small loss-making division of the Jindal Group conglomerate into a large and profitable enterprise. It has also moved beyond steel to power, mining, fuel and infrastructure. In addition to his duties at the family business (he is one of four sons of Jindal Group founder O.P. Jindal, who died in 2005), Jindal is also a member of the Indian Parliament. In an interview with India Knowledge at Wharton at the Wharton India Economic Forum, Jindal spoke about his growth strategies for the company, his entry into politics and why he fought to change the Indian flag code. Jindal, who acts as executive vice chairman and managing director at Jindal Steel & Power, also pointed out that India has only a small window of opportunity to reap the advantages of its demographic dividend. If India is to grow, he noted, its youth must be made employable.
An edited transcript of the conversation follows:
India Knowledge at Wharton: You took a small business and turned it into a star performer. What were the key drivers of the turnaround at Jindal Steel & Power?
Naveen Jindal: After completing my MBA from University of Texas at Dallas, I went straight to Raigarh in Madhya Pradesh [in central India]. At that time, it was in the middle of nowhere. The steel division of Jindal Strips Ltd, one of our flagship companies, was making huge losses — around US$15 to US$20 million every year. My father [Jindal Group founder O.P. Jindal] said, “Don’t worry; this company will make at least $25 million profit per annum.” I couldn’t believe him. How could a company making US$15 to US$20 million in losses make US$25 million profit every year? …
[The company’s turnaround has been] a team effort. No one can do anything alone. My father kept guiding me, kept giving me the courage to go ahead. Every time I [was] in despair, I would go and speak to him and he would encourage me. And then slowly things changed and we were able to [increase] production. The markets changed; steel started to do really well. We [spun] off that division into a separate company called Jindal Steel & Power and have never really looked back.
Even during the downturn, Jindal Steel & Power [made] all its interest payments on time, every time. We set up India’s first 1,000-megawatt power project in the private sector. Jindal Steel & Power has the highest market capitalization of any steel company in the private sector in India. We’ve been able to do it with the team effort of all the people working in the company and God has been really kind to us.
We realized there was an extreme shortage of power in the country, so we set up a power plant. Nobody was making large-size parallel [steel] flange beams, so we started making the beams. We [also] started making plates in bigger sizes. We always tried to make products for which there was a demand or a shortage, and that really helped us.
India Knowledge at Wharton: It looks like you are doing a lot of backward and forward integration. You have mining interests like coal and iron ore and that’s helped stabilize your business, while some of the other steel companies have been hit by the downturn.
Jindal: Right. It’s very important to have control over the key raw materials. We do not control all the raw materials [needed to make the company’s products], but we have captive mines for about 60% to 70%. We have captive mines for iron ore and non-coking coal. This is something my father, the late O.P. Jindal, really believed in — that we must control our raw materials. If we don’t, then other people [will] control us.
So we made a conscious effort to acquire coal and iron ore mines even though sometimes they were not of the best quality. Then we invested a lot to make those raw materials suitable. That has really helped us because there has been a lot of volatility in raw material prices. And you are right; [many] companies have suffered a lot [due to the downturn]. It’s very important to have fully integrated operations from mining [to] finished products [because] if you’re hurting in some areas, [being present in] the whole chain makes you stronger.
India Knowledge at Wharton: What do you see as your company’s role in infrastructure development, both as head of a private company and as a member of Parliament?
Jindal: As far as our company is concerned, we want to concentrate more and more on infrastructure. We want to expand our steel operations’ capacity. [Currently] we are making 3 million tons of steel [a year]; we want to take it to 20 million tons by 2020.
More importantly, we are going to [increase our] focus on power generation. We [currently] generate around 1,500 megawatts of power. We want to take this to around 20,000 megawatts. We want to generate a lot of power from [hydroelectric] sources so that we don’t contribute to global warming or climate change. There is a lot of [hydroelectric] power potential in Northeast India. In fact, our company has recently been awarded one of the biggest [hydroelectric] projects — about 4,000 megawatts. There is no huge water reservoir there, so there is no need for relocation of people. It’s basically a run-of-the-river project, which is environmentally very friendly, but very challenging.
In the Northeast, the whole region is very mountainous and there are hardly any roads to build such big projects. One has to also work closely with the government because some of the infrastructure for these large projects, especially roads, has to be [developed] by the government. We hope we are able to achieve this in the next seven to eight years.
India Knowledge at Wharton: Can you elaborate on the challenges of working in some of these less developed areas?
Jindal: Usually one builds steel and power plants in areas that are not very developed. So as part of your project, you also have to develop roads, bring water, build transmission lines, develop the mines [and so on]. If you want to attract good talent to these remote areas, you need to have good schools and good medical care. Everyone’s expectations today are very high because India offers a lot of opportunities all over.
When we go to places like Orissa or Jharkhand, we do all of these things — we build roads, bring in water pipelines, make transmission lines, make the townships where our people stay, and build schools and hospitals. The city also benefits from all this.
When you want to set up a project, it obviously needs a lot of land. And in India, land is under a lot of pressure because of the huge population. So we try to look for land that is not high yielding.
India Knowledge at Wharton: Non-arable land [land that is unsuitable for farming]?
Jindal: Yes, non-arable land. People are very happy to sell that land. [And in line with the] rehabilitation and resettlement policy of the government, we also give vocational training to these people so that they can later be employed gainfully in the company. We also build new houses for them. So it is a win-win situation for all.
India Knowledge at Wharton: What made you want to run for Parliament? How did that fit into your strategy?
Jindal: I drew inspiration from my father. He joined politics when he was 60 years old because he felt that poor people, the underprivileged people, do not get justice. He said [that] as industrialists, we can make enough money for ourselves, and maybe we can work for a million people. If we have a very big business, maybe we can work for 10 million people. But it definitely does not give you an opportunity to work for a billion people.
So joining politics is part of my strategy to make the country of my dreams. Rather than blaming others, blaming politicians, I wanted to give the best years of my life to serve the people of my country. And politics does give you that opportunity.
India Knowledge at Wharton: There’s a lot of talk about India’s young population and of making sure that the services, infrastructure, education, etc. are in place to leverage the country’s demographic advantage. What are the short-term must-dos for the government?
Jindal: Whenever countries made very fast progress, it was during a time when they had the largest youth population. India is going through that now. But we also realize it’s only a window of opportunity; it’s not going to remain like this forever. We have to give good quality education and good quality skill sets to our youth so that they can be gainfully employed and make meaningful contributions to the development of the country.
If we keep our youth unemployed and they are not able to effectively contribute to the nation’s development, then obviously it’s unfortunate for them, but it’s even more unfortunate for the country, because the country would have lost this opportunity forever.
We are making efforts in primary education and in improving nutrition. Our GDP is growing at a very healthy rate. I am sure that in the coming years we’ll even [achieve] double-digit growth, say around 10%. So there will be a lot of opportunities in the economy and the youth will be ready to take on these challenges and to really grow the country.
India Knowledge at Wharton: Some years ago, you were widely credited with convincing the government to allow the Indian flag to be flown by any citizen, anywhere in the country. [Prior to 2002, the flag code of India permitted flying of the flag on non-governmental institutions only on certain specified days.] Why was it so important to you?
Jindal: When I was in the U.S., I saw people taking so much pride in being able to display their national flag. It’s only a symbolic gesture, but when people display their country’s flag, they rise above their religious affiliations, their political affiliations, and just show their love and faith in the country.
In India, we have people coming from different castes, regions, political affiliations and religious affiliations. All [of them] have to come together as Indians and the national flag is a symbolic gesture of that. I want more and more people to display the greatest symbol of a country at their homes and offices and, even more important, to live by the ideals of the flag. If everyone does their job well, there is no power on earth that can stop India from becoming a very prosperous, happy country.
I never use the word “superpower,” because to me that does not mean much. What we want is for all Indians to be happy, prosperous and proud. Definitely, the national flag has helped somewhat in achieving that, and it’s bringing a realization that we are Indians first; we have to work together in harmony and peace, and together we can achieve good things for the country.