Jindal Steel And Power Ltd
NSE:JINDALSTEL
| US |
|
Johnson & Johnson
NYSE:JNJ
|
Pharmaceuticals
|
| US |
|
Estee Lauder Companies Inc
NYSE:EL
|
Consumer products
|
| US |
|
Exxon Mobil Corp
NYSE:XOM
|
Energy
|
| US |
|
Church & Dwight Co Inc
NYSE:CHD
|
Consumer products
|
| US |
|
Pfizer Inc
NYSE:PFE
|
Pharmaceuticals
|
| US |
|
American Express Co
NYSE:AXP
|
Financial Services
|
| US |
|
Nike Inc
NYSE:NKE
|
Textiles, Apparel & Luxury Goods
|
| US |
|
Visa Inc
NYSE:V
|
Technology
|
| CN |
|
Alibaba Group Holding Ltd
NYSE:BABA
|
Retail
|
| US |
|
3M Co
NYSE:MMM
|
Industrial Conglomerates
|
| US |
|
JPMorgan Chase & Co
NYSE:JPM
|
Banking
|
| US |
|
Coca-Cola Co
NYSE:KO
|
Beverages
|
| US |
|
Target Corp
NYSE:TGT
|
Retail
|
| US |
|
Walt Disney Co
NYSE:DIS
|
Media
|
| US |
|
Mueller Industries Inc
NYSE:MLI
|
Machinery
|
| US |
|
PayPal Holdings Inc
NASDAQ:PYPL
|
Technology
|
If you don’t study any companies, you have the same success buying stocks as you do in a poker game if you bet without looking at your cards.
Utilize notes to systematically review your investment decisions. By reflecting on past outcomes, you can discern effective strategies and identify those that underperformed. This continuous feedback loop enables you to adapt and refine your approach, optimizing for future success.
Each note serves as a learning point, offering insights into your decision-making processes. Over time, you'll accumulate a personalized database of knowledge, enhancing your ability to make informed decisions quickly and effectively.
With a comprehensive record of your investment history at your fingertips, you can compare current opportunities against past experiences. This not only bolsters your confidence but also ensures that each decision is grounded in a well-documented rationale.
Do you really want to delete this note?
This action cannot be undone.
| 52 Week Range |
647.1
1 077.25
|
| Price Target |
|
We'll email you a reminder when the closing price reaches INR.
Choose the stock you wish to monitor with a price alert.
|
|
Johnson & Johnson
NYSE:JNJ
|
US |
|
|
Estee Lauder Companies Inc
NYSE:EL
|
US |
|
|
Exxon Mobil Corp
NYSE:XOM
|
US |
|
|
Church & Dwight Co Inc
NYSE:CHD
|
US |
|
|
Pfizer Inc
NYSE:PFE
|
US |
|
|
American Express Co
NYSE:AXP
|
US |
|
|
Nike Inc
NYSE:NKE
|
US |
|
|
Visa Inc
NYSE:V
|
US |
|
|
Alibaba Group Holding Ltd
NYSE:BABA
|
CN |
|
|
3M Co
NYSE:MMM
|
US |
|
|
JPMorgan Chase & Co
NYSE:JPM
|
US |
|
|
Coca-Cola Co
NYSE:KO
|
US |
|
|
Target Corp
NYSE:TGT
|
US |
|
|
Walt Disney Co
NYSE:DIS
|
US |
|
|
Mueller Industries Inc
NYSE:MLI
|
US |
|
|
PayPal Holdings Inc
NASDAQ:PYPL
|
US |
This alert will be permanently deleted.
Jindal Steel And Power Ltd
You don't have any saved screeners yet
Ladies and gentlemen, good day, and welcome to Jindal Steel & Power Limited Q1 FY '22 Earnings Conference Call hosted by Motilal Oswal Financial Services Limited. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Amit Murarka from Motilal Oswal. Thank you, and over to you, Mr. Murarka.
Thanks, Navin. Good evening, ladies and gentlemen. Thanks for dialing into JSPL's 1Q FY '22 Earnings Call. We have with us the management of JSPL to discuss the results. I will now hand over the call to Nishant Baranwal, Head of Investor Relations, to take it forward. Over to you, Nishant.
Thank you, Amit. Good day, everyone. We welcome you all to JSPL's conference call to discuss our first quarter results. Today, on the management side, we have with us Mr. V R Sharma, our Managing Director; Mr. Hemant Kumar, our CFO; and Mr. Kapil Mantri, Head of Strategy and Business Development. Since the results actually speak for themselves, this time we decided that we'll straight away dive into question-and-answer session. So if you -- I will pass the call to the operator to start taking the questions right away.
[Operator Instructions] The first question is from the line of Amit Dixit from Edelweiss.
Congratulations for a good set of numbers. I have 2 questions. The first one is on the realization. So if I see Q-o-Q realization, that has improved quite a bit for you. But the underlying long prices haven't gone up that much. So I just wanted to understand the drivers behind it and -- I mean, whether they are sustainable?
Yes. Thank you very much, and good afternoon, everyone. Yes, you're right, the realization has gone up. There is a total increase of about -- delta is about INR 10,000 a tonne, but simultaneously the cost has also gone up by INR 7,500 per tonne. So if you see the overall impact, then the overall impact is INR 2,500 per tonne. When we see on the Y-o-Y basis, you have seen that our EBITDA level has jumped from INR 1,800 crores to INR 4,524 crores in stand-alone and on a consol basis, it is INR 4,539 crores. So if you -- overall, if you see the market conditions, despite of pandemic or I would say, wave 2 in the month of July -- sorry, in the month of April and May, so we have seen that the sales we could maintain. 1.61 million tonnes sales we have done and we have also done a production of 2.01 million tonne. So there is a growth in sales as well as there is growth in production. Sale is not exactly as the production was because due to pandemic and due to this oxygen we have given to LMO, that is medical-grade oxygen, so we were facing some problems. And there was an issue on the ports, there was Yaas cyclone. So we could not export or we could not dispatch the same quantity what we produced. But by and large, the company has done very well.
Sir, my question was specifically on realization. I mean, what specifically caused the realization to increase much higher than the underlying long prices?
You see the -- as I told you, the price increase versus the cost increase, there is a delta of 25%. So that has given the better realization. And export is the another major contributor.
Okay. The second question is on iron ore costs. So how much has iron ore costs gone up Q-o-Q? And has the benefit of Sarda iron ores mines been completely exhausted in this quarter?
Yes. The SMPL, whatever stock was there, that is exhausted. And as you know, Odisha government is having very favorable policy for steel mills. Those are located in all Odisha. So we are given preference in buying the material, especially from OMC, we have a long-term agreement now. And as per their policy to support the local mills, they are also going to get us the material from the merchant miners, which we are hopeful that there will be no shortage of iron ore in the Q2 and Q3 or in the subsequent quarters. The other is, you have seen that we have produced more than 2 million tonnes of pellets. And we exported also pellets, that is about 400,000 tonnes only. And this shows the operations are quite stable. Iron ore availability is not an issue. We will be in a position to source iron ore from OMC, merchant miners and NMDC. The overall increase, as you asked, yes, there was an increase from, say, INR 6,000 per tonne to INR 11,000, INR 12,000 a tonne, depending upon the various grades of iron ore and fines. But now for the last 2 weeks, we are seeing that from $220 a tonne in the international market, the iron ore has come down to $160. So this $60 of reduction in the iron ore prices, that has also forced the local iron ore and merchant miners to reduce the price. And we are now seeing that more than INR 2,000 reduction, we've already seen from the merchant miner, which has been passed on to the steel mills. And that effect will come in Q2.
The next question is from the line of Sumangal Nevatia from Kotak Securities.
Congratulation on great set of numbers. And...
Sumangal, may we request you to unmute your line from your side and go ahead with your question.
Yes. Can you hear me?
Sumangal, we are unable to hear you. May I request you to unmute your line from your side and go ahead with your question.
Yes. Can you hear me now? Hello.
Sumangal, can you hear us?
Maybe we go to the next one and then we come back to Sumangal.
The next question is from the line of Kamlesh from Prabhudas Lilladher.
One question on the part of the debt, let's say, it has been -- debt, it is down roughly around 30-odd percent quarter-over-quarter. So that also includes this JPL element. But if we see interest cost, as stated, it's hardly down 14%...
Kamlesh, sorry to interrupt you. But your audio is not very clear. May I request you to repeat your question from the beginning and a bit louder please?
So just one question on the part of your debt and interest costs. Like, say, if you see the debt, it has gone down by roughly around 30-odd percent quarter-on-quarter, primarily because of the JPL. But if you see the interest cost, it has gone down hardly around 14%. So what is the -- is it because of the increase in the working capital? What's the reason behind the lower fall in the interest cost?
Yes. I'll request our CFO. He will reply you.
Thank you for your query. And if you see on a consol basis, my interest has come down. Even on quarter-to-quarter basis, on a Y-o-Y basis, there is no increase in my interest cost, first. And second, even on a stand-alone basis also, my interest cost has come down because of deleveraging of debt profile. And another query which you wanted to ask?
Sir I'm not doubting about the fall in the interest cost. I'm saying that the quantum of fall has been much lower or half of the fall in the debt.
Reason being, if you see, we have also taken care of our foreign currency loans. If you would like to see, that our LIBOR-linked and that is around 4%. And you can't link that 14% and 26% of the debt. The blended cost definitely came down. It's not gone up in commensurate with reduction in debt.
Okay. And secondly, on the, let's say, though the cost question had been asked by the prior questioner. So just one on the part of the iron ore inventory. So how much is the inventory left? I know that you would have consumed it [indiscernible] plant had or in the pellet plant, it may be there. So can you please give the exact quantity which you would have on the iron ore inventory which you have from the, like, say, 12.5 million tonnes of inventory which was released because of that Supreme Court order?
Thank you. So at any point of time, we maintain about 2.5 million to 3 million tonne of inventory. And that is there across all the plants put together, that is pellet plant as well as Raigarh and Angul plant. We are not short or dearth of iron ore. And it is a regular business every day. We have to pick up iron ore, we have to buy iron ore, and we have more than 10 different sources today. As I told you, Government of Odisha is already supporting in a big way. And you might have read in the newspapers that Chhattisgarh government, Mr. Baghel or the Chief Minister, he has also called NMDC, and he has told that at least 80% of the material should be made available to the domestic industry or whatever the quantity is required by them, whichever is higher. And NMDC has started changing their stance, and they are now supporting too much to Chhattisgarh industry. And I'm sure there won't be any shortage of iron ore for the people those who have installed plants in Chhattisgarh and in Odisha.
Sir, I was referring to only the iron ore inventories.
I just wanted to clarify, Kamlesh. With respect to your question, as MD sir rightly mentioned earlier, we have exhausted all the inventories in terms of raw material, finished goods, pellet, whatever. We have utilized full iron ore inventory, owned iron.
Okay. And lastly, sir, what is the current NSR versus last quarter coverage. How are the NSRs moving now?
Yes. Thank you. So if you see the -- I'll compare with 2 barometers. One is NSR on Y-o-Y business. You see, last year, in 2020, the NSR was very low because there were about 75% to 80% of exports. And almost the entire country was in the lockdown. So we were in a position to maintain the plants, and we kept continued. But this year, we found that because of this spot market, international spot market was very hot. And we got a major jump in the NSR. So last year, our average NSR was about INR 42,000 a tonne. And this year, the average NSR is INR 63,000 a tonne in this first quarter. So that has brought the numbers up significantly. But as I told you earlier, there is an increase in the cost also, the input costs have gone up. And -- but still in Q1 2021/'22, the NSR was more than INR 62,000 a tonne across all products.
The next question is from the line of Sumangal Nevatia from Kotak Securities.
Two questions. The first one on the future strategy. Now when we were discussing the power divestment, one of the reasons shared was that in the past, we've not been able to get a strategic partner given this high carbon footprint of the power business. Now that this deal would most likely go through in the next couple of months, are we open to get some strategic partner in our steel business to further strengthen our downstream business and going forward growth?
Yes. Thanks very much, a very valid question. So we are very open on any kind of strategic alliance or mergers or acquisitions or it can be in any form. And there are companies already. Government of India is also invested in divestment. So one is NINL, that is Neelachal Ispat.That is on anvil. And also the another company, Government of India's company, that is RINL, Rashtriya Ispat Nigam Limited. So since we are in steel, and we are also in the Eastern part of the country, so we will definitely be in plan to have such deals, if they come through. But we are not a distressed buyer. We will be working very meticulously. We will be seeing that whether there are merits or not merits in this particular deal. And if they are useful, then we may go along or we may find a partner to enter as a JV. So this is also we are working.
Okay. Sir, my question was not with respect to the divestment and the steel assets on the block, but more with respect to any global steel major, having a partnership with them or getting them onboard as a strategic equity partner? So has there been any initial discussion with any of the steel companies globally, which you can share?
I'll tell you. You see what happens when you grow and you establish your credentials and there are many proposals that do come in life. So there are so many people, those who are interested in joining hands with JSPL today. And some of the strategic alliances can be for the technology, for specialty products. As you know, that Government of India has come out with the PLI scheme. So with this PLI scheme means more and more sophisticated and high value-added grade of steel is required to be produced. So it doesn't mean that there will be equity partner, maybe very minor equity partner. So these things, we are very open. And there are so many proposals coming every day. So we are evaluating that whether we should go for a technical process collaboration or equity participation. But this will be known to the market maybe in the next 6 to 8 months' time.
Okay. Understood. My second question is one with respect to the expansion. There's this 1 million tonne CTO approval at Angul which is long awaited. So any progress on that? And second, on the cash flow side, till last year, you were hardly paying any cash tax given the unabsorbed losses. So if you could just guide what is the leftover unabsorbed losses at the steel business as stand-alone entity? And what could be a cash tax rate in FY '22?
I see, as far as Angul expansion is concerned, we are working now. We are going to invest about INR 18,000 crores. And we want to add the capacity of about 6 million tonnes. And this is what we are working today. So if all of the statutory clearances, approvals are on the way, and we have been talking to the Government of Odisha and central government. We have also signed an MoU. And the Government of -- in fact, the Government of Odisha has already cleared our business plan to produce 25 million tonnes steel there in Odisha, in Angul. If that goes in line, then we'll be the largest steel producer in the world in one location. So now coming back on the -- your question of cleansing and the overall cost of borrowing. So this, I will request our CFO, Mr. Hemant, he will reply you.
If you see the cost of borrowing, even I would like to mention that I'm pleased to inform that our rating has moved multi-notches, and we are on the track to achieve reduction in prices because it's a scheduled process. And I hope that we will be able to compete with respect to interest costs in the next 3 to 6 months with any of my peer group.
Sir, my questions were different. I'll just repeat. One is I was asking specifically with respect to the 1 million tonne CTO approval at Angul, when do we expect that? We understand the overall expansion plan. And second question was on the cash -- on the tax rate. Last year, we've been using unabsorbed losses and not paying cash tax. What will be the cash tax rate this year?
As everyone is aware, we paid the tax, income tax installment around INR 250 crores for this quarter, and you can take estimate from there on. And there are still adjustments left so that we can optimize on income tax. And further, we already moved to new regime of income tax, wherein we fall under 25%.
And CTO, consent to operate, also, there are no issues. I think you have some questions you asked about 1 million. So I think there was no issue for this 1 million consent to operate.
Next question is from the line of Ritesh Shah from Investec.
Couple of questions. First is, how should one look at the state of overseas subsidiaries, with steel continues to be on a going concern basis. How should one understand it, given there are significant investments in overseas subs from the stand-alone entity?
Yes. The overseas subsidiaries, if you see, we have 3 locations today. One is Mozambique. The other is South Africa, and third is Australia. So if you see all these 3 assets, Mozambique and South Africa, they are doing extremely well. They're in profit. And South Africa, all the statutory clearances are partially cleared. And hopefully, we will be in operation very soon in Australia.
Sir, do we have any plans over here? Any quantifiable numbers either on production or on a sustained basis, how should one look at the operating metrics?
We are working as to how to start mining about 2 million tonnes coal per year, that is coking coal, from Australian assets. And hopefully, we will hear a good news in the next few months, 3 to 4 months' time. So we are working how to start production of coking coal in Australia. And now is a good deal today because coking coal is at about $220 to $230 per tonne for the Australia. And it used to be -- 3, 4 months back, it used to be only $90. So this is the right time, and we are working very hard to start the mines.
My second question is on raw material sufficiency. One is you indicated that coking coal prices has moved up pretty sharply from $90 to $220. So what does it mean for JSPL's cost curve in the forthcoming quarters given Sarda ore is also done with? Do you see the price increase to be commensurate enough to ensure that the spreads remain at current levels? Or are we...[Technical Difficulty]
Can you hear me now?
Yes. And the second question is, we have highlighted incremental expansion plans of 6 million tonnes. What is our strategy on iron ore security if one takes a 3- to 5-year view?
So you asked a couple of questions in one question, so one by one. First of all, SMPL was one of our suppliers. Of course, we were their largest buyer, but they had another 20 buyers with them. So similarly, the other companies today in the vicinity, the Rungta mines or Essel Mining or OMC or NMDC. So we are a large customer for them also. We are the largest buyer of iron ore in Odisha and Chhattisgarh. We enjoy a good relationship in between customer and seller with these iron ore producers and iron ore users. So there's no dearth of iron ore. India has a lot of iron ore, more than 30 billion tonne of iron ore. And we are now working how to beneficiate the iron ore, so that whatever the low-grade iron ore lying in the country, we'll be beneficiating and creating pellets out of that. We are adding one more pellet plant facility at 6 million tonnes. And there'll be no shortage of iron ore. As far as the SMPL Sarda mine is concerned, yes, we were in business with them. And whenever they come back again, then definitely we'll be glad to work with them in times to come. But we have full security of iron ore from Chhattisgarh and also from Odisha. As far as the new mines are concerned, if that is the question, then we do not want to bid irrationally. And our rationale is that we should see on long-term basis what is the real price and how can we survive and sustain. And this is what we are working at. And we know the international price of iron ore, they have gone down from $217, $218 or $220 to $160. So this reduction of about $60 per tonne, and that is a good sign for the Indian industry. And when we go for the new auction route, bidding, then definitely, we will consider this kind of reduction, which has already taken place in the international level. Hope I answered you.
Yes, sir. And on the coking coal cost inflation, how should one understand the cost increase in Q2 and Q3 given spot prices have moved up substantially? Do you see you will have enough price increases to offset this?
Yes. You see, what happens when the iron ore went down and coking coke prices, even if they are a little high, so then one can maintain a proper balance. But in last quarter, all of a sudden what has happened, maybe first time in a decade, that iron ore prices and coking coal prices, they were at par, similar. So $220, $220, so that was a very unusual combination. Normally, either coking coal prices, they are soft and iron ore is up or coking coal prices are low -- sorry, high and iron ore is lower. So now the situation has come where the coking coal prices are higher and iron ore prices are lower. So that is giving a good balance to the Indian steel industry as well as to the customers, to the end users. So nobody is under pressure now because 2 things are not going simultaneously up or simultaneously down.
Plus I want to add one thing. We have raw material security at -- wherein we locked in prices available till September '21.
The next question is from the line of Vishal Chandak from DAM Capital Advisors.
Sir, my first question is with respect to your value add production at Angul and Raigarh. So your current capacity is 8.6 million tonne. In the next 4 years' time, it will be 15.9 million tonnes. So what would be the mix? Would it be same put at HSM stage or you would want to go beyond. What would be your product mix like going forward?
Yes. Thank you very much. You rightly asked the point. Number one, we are now adding a hot strip mill as the power integration. And because if you see our last 1 year of sales, we are selling a lot of semis. So we want to come out of the semis business. We do not want to sell semis. We want to convert these semis into finished goods for better value addition. This is one area. So first of all, we are working on specialty hot rolled coils and also specialty plates where the value addition is extremely high. And slowly, gradually, we are also working at how to go for the downstream of hot rolled coil, that is cold rolling, galvanizing and color coating. So hopefully, by 2023/'24, we will be in this particular product line, which is cold rolled, galvanized, color coated, Galvalume and also pipes. So pipe and tube sector is doing extremely well, and we want to maintain our presence in pipe and tube sector also.
Any thoughts on going for special products like electrical steel et cetera, which are not manufactured materially? The pipes and tube market looks completely overcrowded at this point in time, if we look at it.
You see there are 2 questions. One is electrical steel, yes, we are working with a European company, and we are already -- we have had a couple of rounds of meetings. And basically, electrical steel is a commodity which is produced by the steel mill shops. It is not only a rolling area. So the steel mill shop is equipped with -- to produce right grade of slabs to make electrical steel. Up till now, we didn't have a cold rolling mill -- sorry, hot rolling mill, HSM. So now we are adding HSM. So once the HSM, the hot strip mill, is installed, we'll be in a position to produce electrical steel also. We want to have a diversified portfolio in our product basket, like electrical steel, like specialty steel sheets for railways and also for the containers, you might have heard over news, and specialty rail, that is 1080 and 1175 grade of rails; the specialty plates for the shipbuilding, submarines and for the war ships as well as for the cryogenic applications. So we feel that we are the most diversified product producers in the country today. So that will continue. Hope I answered part of your question. What was the balance?
I think that answers it. Sir, my second question was with respect to your Australian coal mine. So about a year ago, the coal pricing was just about $110. And today, they are close to about $240. So at what price would these mines, especially the Australian mines would be viable?
The cost of mining is about $62 to $70 a tonne, $26 is cost of transportation. If we do the washing, it is $10 to $12 a tonne. So put together, everything is about $110 a tonne. And if we sell or we bring to country at a price of about $200 FOB, then it is a very good bet.
The next question is from the line of Raashi Chopra from Citigroup.
So I wonder, with the price you've mentioned in this quarter, the realization increase is in INR 10,000 and costs are up INR 7,500. So we've seen an EBITDA per tonne expansion of about INR 2,500 per tonne. How do we think about this in this current quarter? Or just taking stock into account basis -- spot realization and spot cost?
You see, we are seeing a very stable quarter 2. Reason being the spot international market is still very good. This is one. Number two, the iron ore prices have started falling, whereas the coking coal price is stable at $220 a tonne. So I think we've been in a position to maintain a similar inflow of funds in terms of overall EBITDA in quarter 2 also.
Sir, just following off on that. So there's no coking coal inventory such that within there'll be some sort of a build-out where your coking coal cost would still be higher than in this quarter?
No, because we have our own coking coal in Mozambique. So our mix is about 34% today. We use our own coking coal. And we also have anthracite coal mines in South Africa. So this will add to another about 7% to 8%. So I think about 45%, we'll use our own coal which will definitely give a good blend to us in terms of overall cost reduction and cost control. So we are not affected on that.
And sir, domestic realizations, they are also just closing on to what you are saying on a sequential basis?
Yes. So domestic realizations, there are 2 factors here. One is the international spot market prices, the other is the domestic prices. So if you see the last month, our country has earned more than INR 1,16,000 crores of GST. And 3 days back, Government of India has already allowed state governments to withdraw the money -- to spend the money for the infra projects. The kind of growth what country is now looking, I think more and more infrastructure focus will be there from different states. So that is going to definitely give an impetus to the economy. The other point is, thanks to Mr. Prime Minister, Mr. Modi, who has already taken a lead in vaccinating people, those who are 18 years or plus. So if all of the people in the country, they are vaccinated who are 18 years plus age, that means in case of any pandemic kind of situation or in case of any fear of wave 3 or any other wave, people will not run away to their hometowns or home states. So if they don't go to the hometown, home states, then the construction activities will continue and so is the MSME sector. So we are looking that in times to come, there will be a very promising growth as for the industry is concerned.
Okay. Just one more question on the debt level. What is -- so it's about INR 15,000 crores, excluding JPL at the moment. And once the transaction concludes, you will benefit by another INR 3,000 crores, right? What is the goal for FY '22 keeping the transaction and your cash flows in mind?
May I request our CFO to reply.
We are looking forward by the end of financial year, the debt -- net debt around INR 8,000 crores.
Okay. And this would involve how much CapEx in this year?
CapEx, as the guidance we have given, INR 2,000 crores to INR 2,500 crores, depending upon the cash outflow, depending upon the last 2 or 3 months, INR 2,000 crores to INR 2,500 crores.
I would just like to reiterate that any forward-looking statements that we'll be making on the call, as all of you know, are always subject to the market conditions and a whole host of conditions. Just wanted to reiterate that front.
[Operator Instructions] The next question is from the line of Ashish Kejriwal from Centrum Broking.
Congratulations on a good set of numbers. Sir, in terms of net debt, what we have seen from fourth quarter to first quarter, it is a reduction of around INR 6,900 crores. Obviously, this improves JPL debt also. So is it possible to share excluding JPL debt, how much debt has reduced on a quarter-on-quarter basis?
If you see on a gross basis, including JPL, the debt reduces more than INR 11,000 crores. But part of the cash being utilized, as we are mentioning, to build the inventory for this quarter. And also as we mentioned, to build the inventory for this quarter.
So what was the net debt of JPL at the end of FY '21 then sir?
I think we have reduced by a couple of hundred crores, but it would be in the range of upwards of INR 6,000 crores.
So this means that this working capital increase has not allowed us to reduce our net debt significantly in this quarter?
Yes. As our MD sir rightly mentioned earlier also, because of logistics constraints at the ports and all, all those goods are lined there. And we built our raw material inventories to take care of our quarter 2 as we're lucky in the prices of coking coal and other raw material prices.
Sure. So if we heard that...
Sorry, Hemant, please also -- I'm sorry, sorry. Hemant, please also explain that we have already prepaid to many of our lenders? We have planned...
We have done INR 11,000 crores gross reduction, and whatever cash has been locked out -- locked in because to lock in the raw material prices. And as you rightly mentioned, there is a constraint or congestion at the ports. All that by letter of credits, the money is safe, we will realize in the next 1 to 2 months.
Okay. And sir, if I heard correctly, in one of the questions, you have mentioned that we have booked coking coal at lower price till September 2021. So that price is something like $120, $130? Or it will be on upward of $200?
We are a company, we keep on buying every day because we cannot stop buying and wait for the prices either going up or down. So we have to maintain a pipeline. And in that pipeline, sometimes you gain, sometimes you lose. But nobody knows in the world what is going to happen tomorrow. So it's a regular and continuous exercise, and we maintain that. So in the system, we get benefit sometimes and sometimes we do not get benefit. So it is with everybody, not only with us. So one good thing is that, yes, you are right, the average buying price is much lower than many of our peer group might have done at $160, $170. But we are lower than that. But now as I told you, the major impact is the 44%, 45% of the coal, which is coming from Mozambique and South Africa, that is going to keep our cost under control. And once we start Australia, and as I told you earlier, once we start Australia then if we take profit as a user in JSPL because these are the JSPL mines, then there will be definitely a benefit of about $80 to $100 a tonne.
Sure. And sir, secondly, on iron ore inventory, the free iron ore inventory which we had with Sarda mine, how much we have used this quarter? And secondly, on -- if you can help us in understanding whether this preemption policy of Odisha that has been implemented or not?
Yes. Actually, the iron ore which was stopped at the SMPL premises, that was exhausted in the month of April itself. And now the preemption policy of government of Odisha is a very excellent policy. Actually, this was not very effective because people were not demanding. But now most of the industries, those who have put up their shops in Odisha, they are claiming to have the benefit of preemption. JSPL utilized this preemption policy in 2017. And again, now we have applied for the preemption under the preemption scheme of Government of Odisha to make the iron ore available to us.
The next question is from the line of Abhishek Poddar from HDFC Asset Management.
Sir, one clarification on the net debt. When you say INR 15,200 crores of net debt as at the end of June, so that INR 3,015 crores of cash that you have to receive, is that already getting accounted there? Or that is something which you get in later date, so you're not counting that?
Because the cash is not available as on today. The cash will come on a later date, on the closing date of the deal, first. And second, money is always fungible. And we will use this cash for our CapEx as well as reduction of debt. As you are aware, the steel industry is doing good and throwing cash month-on-month. And I think that will be utilized to deleverage. As I mentioned, our net debt would be INR 8,000 crores by the end of this financial year.
Right. So as and when you receive that cash, probably you'll adjust that, we can take from your...?
Yes.
Understood. And sir, would you be able to share the working capital increase number for the quarter or operating cash flows, either number?
As I mentioned that to build raw material inventories and the finished goods for exports, all put together may be in the range of INR 2,000 crores to INR 3,000 crores.
Okay. And you would expect this to unwind as the year goes by?
Yes, definitely.
Understood.
I think not a year. Year is far away. If we talk about next -- in this quarter or maybe 1 month more, not beyond that.
Okay. So your end of 2Q or 3Q, we should see this INR 3,000 crores getting back in your cash?
Absolutely.
Understood, sir. Sir, second question regarding the steel prices. In rebar, if we see the international prices and domestic prices, there is about 10%, 15% kind of a discount, which Indian prices are trading. So how do you see this price moving up or catching up with the international prices in the next 1, 2 months? And what are the triggers?
Yes. So this is a commodity basically. And we have to be in line with the expectations of Government of India, with the expectations of the customers, affordability. And the reason, today, if you see in India, the rebar prices are much lower than the prices of plates, coils, rounds or wire rods. So rebar prices are much lower. And -- but still, this is a good product. We have found a balance in between exports and domestic market. But we are in a position to load our mills fully. And 50% we are exporting rebars and 50% we are selling within the country.
Yes. But as the monsoon fades away, probably in September, should we expect the price coming to parity with the international prices?
You see if the iron ore prices keep falling like this and the iron ore comes down to $110, $120, then there's no point increasing the rebar prices. If the iron ore prices are at a stable at $160 or go up, then only there can be a reasonable correction, which can take place. Otherwise, no.
Understood. And sir, the demand is still, in July also, it was weak. So export constituted a large portion of your volumes? Or how are you seeing the domestic demand changing now?
Yes, demand -- domestic demand of rebar was less because as I told you, one is flood situation and the other is the construction workers, they had gone back to their hometowns. But with the vaccination drive undertaken by Government of India, most of the people will be vaccinated by the end of August or early September, at least the first vaccination will be over. And the second dose, once it is available, then I'm sure by, say, September end or mid of October, the entire nation, the workforce, having age group of more than 18 years, will be in a position to take the vaccination. And that will bring people to the work. So this is a good drive or campaign taken by Government of India. We're thankful to them. Industry has welcomed the move. And the success rate is, I would say 99,999 out of 1 lakh people. So there is a very good success rate, if you see. The vaccination is excellently doing well.
Next question is from the line of Vineet Maloo from Aditya Birla Sun Life Insurance.
It's Aditya Birla Sun Life Mutual Fund. Sir, my question is on Australia and coking coal mines. So what is the strategic intent out there? Are we going to look for a buyer now that the environment is slightly better? What -- could you please share your thoughts around this?
There are 2 things in it. One is, the first motto is to bring the mines into production. Because once the mines, they start generating revenue, then we can always find the better opportunities in times to come. If tomorrow, we get a good deal, we are not under distress today. If we get a good deal, then, for sure, we can do divestment, maybe partly, fully, 25%, 30%, 50%, so that we secure our requirement and more than that, we don't need. So this is what we have on plan, but we are not a distressed seller. Right value for money if it's available, right value of our assets is available, then we may think.
So sir, I just want to understand earlier when times were not so good, we were still -- we were looking for a buyer and we were not able to find buyers. And now times are good, this is probably the best time to find buyers. And honestly, restarting production and scouting for the buyer or actually this can happen parallelly, right? They're not -- it's not that they have -- need to happen in a serial fashion. So just want to understand, I mean, do we want to be slightly ahead of time and do that exercise because then again, we run a risk. This is -- again, these are coal mines in a developed country. We don't want to end up in a situation where we have to eventually do a distressed disposition of assets, right, like you're doing with JPL.
So you're right. When a mine owner or a company like ours, when we were in trouble, I would say, a lot of debt and everything and we are not generating any PAT for many years, 3, 4 years, 5 years. So today, we are in a different situation. That's why our first aim is to get the mines operational. And simultaneously, there are many companies or many investors those who are touching us, and they have already expressed their interest in these mines. But today, if we try to sell or try to do the divestment partly or fully, then the value for the total assets will be very less. So we feel that the coking coal is a scarce commodity. And there are not many players, those who are going to stay in this particular business. And our assets are very near to Sydney. And these are very prime assets, I would say. So we will definitely get the right partners in times to come. The day we get it, we will definitely -- we like to lighten up ourselves, and that lightening will be helpful to JSPL as a whole and also to our lenders.
So is there a time line for the production ramp-up that you want to achieve certain level by the end of this year and certain -- another level by the end of next year, something like that? And separately, is there a thought process in terms of time line when we want to exit these assets based on the production levels?
And this is related to coking coal mines?
Yes, I'm talking of coking coal mines.
Yes. Okay, okay. So our plan is to start with about 1.2 million to 1.5 million tonnes of production. And this will be from the calendar year, January 1, 2022 onwards. And then in calendar year 2023, we want to ramp it up to 2 million tonnes. In the meantime -- if that is our requirement basically. In the meantime, if we find a better partner, then definitely we can look into it.
Okay. Sir lastly, similar things on coal mines as well outside India, what are your thoughts out there?
You see, we have coal mines at 2 locations. One is Mozambique, which is doing extremely well. And the other is Kiepersol, that is in South Africa, that is also doing extremely well. So there are no issues. Both the mines are running very well.
Sir, my question is, sir, from ESG angle, I mean, if at all, we want to divest and coal price is north of, let's say, $120 to $140 for thermal coal, that is the best time to divest, right?
I tell you one thing. ESG, definitely, it is in the top agenda for all the steel mills in the world. And -- but today, it cannot be -- we cannot switch over from a carbon footprint today, whatever we have to geocarbon or carbon-neutral overnight. So Government of India, as the best protocol, they have taken a very conscientious decision. And that yes, by 2030, we want to reduce the total CO2 emission. And Government of India is discussing with the entire steel industry as well as power sector units and also to our refineries how to reduce the overall CO2 emission to the universe. So we all are working on that. But it is -- it will take a bit of time to reach to those levels where we want to be. And as far as the coal business is concerned, we see the -- today, there is no substitute to blast furnaces in the world. The largest number of population of blast furnaces today is in China, and they produce more than 800 million tonnes out of the blast furnaces only. So if you see the overall 1.7 billion tonne production in the whole world, more than 1.2 billion tonne is coming from blast furnace routes. So unless hydrogen at a low price is available, unless the latest technology...
We were talking about -- sir, I'm sorry to interrupt sir, but we were talking about thermal coal, right, which is Mozambique and South Africa. So sir, my question is...
No Mozambique is not thermal coal. It is coking coal.
Yes, it's coking coal.
And, South Africa is also not a thermal coal. It is anthracite coal.
Sir, that can be used for steel?
Yes, we are already using it. This is what I told that our product mix -- our mix will be 44% captive.
Okay, this I didn't realize. I'll take it offline on this one.
Operator, we would want to take the last 2 questions now.
Sure. The next question is from the line of Satyadeep Jain from AMBIT Capital.
A couple of questions. We've seen input cost inflation in coking coal, in iron ore also now and in thermal coal also, to some extent. Where does the Angul DRI plant now stack up versus the blast furnace in terms of productivity, in terms of cost relative to the blast furnace?
Yes. Thank you. So first of all, the Angul DRI plant is doing extremely well. We are converting coal into gas. And also first time in the world, we also mixed the coke oven gas with the syngas, that is coal gas. And 70% we are using coke oven -- sorry, the coal gas, that is syngas. And 30% to 35% about that we are using the coke oven gas. So this combination has driven us to very good cost advantage. Our cost of energy and cost of making DRI is today, I would say, much lower than the 100% coal-based kilns, this is one. Then number two, we are now working at a mix of these 2, is giving us a gas at a price of about $3 per MMBtu. But if we have our own coal mine, then we can definitely bring it down to less than $2 per MMBtu. So this is what we are working. And as for the blast furnace is concerned, all 3 blast furnaces are doing extremely well. So we have already reached to our rated capacities on 3 blast furnaces, 2 in Raigarh and 1 in Angul. And we are now expanding. We are also working for 1 more blast furnace. But simultaneously, we are also working how to inject hydrogen into blast furnaces, so that we can meet out the country's expectations towards the CO2 emission reduction.
So you would say the DRI, given where coking coal prices are, it would be -- the cost would be lower than that for the blast furnace side?
Yes, yes, yes, you're right. So the steelmaking through DRI will be cheaper and cost-effective over blast furnaces in times to come.
Secondly, on the sales mix in the quarter, there was inventory build due to export bottlenecks and lower demand. Is that inventory build mainly in long, whether it is rebar and billets. Or maybe in another way, the sales mix had higher percentage of flats in this quarter just because you had maybe higher inventory build in long. Would that be correct?
Actually, no, it is not correct. The inventory at port is because of 2 reasons. One is, there was a cyclone in Bay of Bengal. So we lost about 10 days. Number two, Government of China, Singapore, Hong Kong, they have issued a warning that any vessel touching the Indian port has to be in mandatory into high sea as a quarantine for 14 days to 22 days. So this has led to the overall congestion at the unloading ports in entire Southeast Asia. And that has stopped the faster circulation of vessels. And the vessel owners, vessel operators, the crew, they were also not interested in touching the Indian ports. So we have discussed with Government of India, Ministry of Shipping and Ministry of Steel to declare our ports as COVID-free ports. So once Government of India comes with a circular that all of our ports are COVID-free ports and they maintain some kind of record that yes, each and every worker or port worker, employees, they are going to the port, they should be vaccinated properly and they are -- on a weekly basis, they are -- their COVID test should be done, anybody found positive, they must take utmost care. And then only we can build up the confidence of the international shipping companies to come to Indian ports and especially in the Eastern coast. So I think the situation will come under control, and we will be in a position to salvage the inventory. But the entire inventory lying at ports, it is against the letter of credits, confirmed letter of credits. And we hardly cross the last date of shipment. So 99.9% of the vessels or the total quantity is delivered within time. So we are not very much worried on that ground. But of course, if we can export it faster, so we can get the repeat orders faster. That's all.
Sir, the entire inventory build in this quarter, would it be largely rebar, whether it is at port or at the plant, is it largely rebar and billet?
No, no. It is a mix of everything. And it's the hot rolled coils, we have placed the structural and beams there, we had wire rod at depots. TMT was very less, rebar was very less, about only 30,000 tonnes, it's very meager quantity. But otherwise, the flat products as well as the structural steel. The question here is not a commodity or a product. The question is the availability of the vessels. So if the vessel availability is not there, that product will keep on waiting.
The last question is from the line of Noel from Ashika Group.
No, nothing else from my side. All the questions have been answered.
Good. So thank you so much. Thank you so much for listening us, and thank you so much for imposing faith and trust in JSPL. I'm sure with the kind of results the company has shown in the last 6 quarters, so this is commendable. You are seeing growth quarter-on-quarter basis. And that shows a strong management, strong leadership, strong marketing scale and strong product mix as a whole. And we are thankful to Government of India. They have declared a PLI scheme. It's not a matter of INR 6,300 crores. But this shows that Government of India has acknowledged the necessity of steel industry, and they acknowledged the importance of steel industry, and they've also given a message to lenders, to financial institutions, to bankers, that yes, government has a very positive outlook for our steel industry. So the next 1 decade will be a game changer for the entire nation, I would say. Because more and more steel plants are going to come. And there will be brownfield expansion, there will be greenfield expansions and country needs to reach 200 million, 300 million tonnes per year of steel production and consumption. I'm sure we all, put together, will be in a position to reach to that level. So thank you once again, and thank you for showing trust and faith in JPSL. We, as a management, will always try that we never let down our investors, and we exceed to your expectations.
Thank you very much. On behalf of Motilal Oswal Financial Services Limited, that concludes this conference. Thank you for joining us. You may now disconnect your lines. Thank you.