Jindal Steel And Power Ltd

NSE:JINDALSTEL

Earnings Call Transcript 2021-Q2

[Operator]

Ladies and gentlemen, good day, and welcome to Q2 FY '21 earnings conference call for Jindal Steel & Power Limited 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 Financial Services. Thank you, and over to you, sir.

[Amit Murarka, Research Analyst]

Thanks, Aisha. Good afternoon, ladies and gentlemen. Thanks for dialing into JSPL's 2Q FY '21 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 the call forward. Over to you, Nishant.

[Nishant Baranwal, Head of Investor Relations]

Thank you, Amit, and thank you, Aisha. Good day, everyone. We welcome you all on this call to discuss the 2Q FY '21 financial results for JSPL. Today, we have with us our Managing Director, Mr. V R Sharma. Also, it gives me immense pleasure to introduce you all to our Chairman JPL and Director Finance for JSPL, Mr. Akhauri Sinha.Just to give you a brief on Mr. Sinha, Mr. Sinha has more than 4 decades of experience with the banking industry in India and the U.S. in public sector and the private sector, including foreign banks. He's also headed the Royal Bank of Canada in India for over 12 years. Mr. Sinha has vast experience in banking, international finance, debt markets, ratings and a lot more.So with that, I will request our MD, Mr. V R Sharma for his opening comments, please. Sir?

[Vidya Rattan Sharma, MD & Additional Executive Director]

Good morning, ladies and gentlemen. The Q2 had been excellent in the history of JSPL. Fortunately, with the blessings of everybody and the markets growth, we could achieve ever highest EBITDA, ever highest sales turnover and ever highest production. So this was an excellent quarter.And H1, if we conclude, then H1, we could do 3.5 million tonne of production. And H2, we are in line as per our earlier declaration. We will be doing another 3.8 million tonne in H2, and that will be about 7.3 million tonne, maybe a little more. We'll try to reach to 7.5 million tonne as a whole.So company is doing extremely well. Market is supportive. We have done a lot of reengineering in our working. We could reduce our costs. We could increase our EBITDA level. The demand has picked up. Auto sector has picked up. Infrastructure sector has picked up. Thanks to Government of India, they are spending a lot of money in infrastructure projects, especially for the pipelines, water pipelines, cryogenic storages, tanks, shipbuilding, Indian Railway.So these are some of the areas where we are reaping the benefit. Then we have -- first time in the country, we have made imports substitute in rail, that is called grade 1080 Head Hardened rail for metro rails, and 1175 HT that is for Indian Railway. We are also now approved by RDSO and Indian Railway to be a regular supplier to them. And already, we are approved by metros. And metro, we already started the supply.So Indian metro users, also the railway -- Indian Railway, they are getting immense benefit associating with us because we are delivering material within 6 to 8 weeks' time, whereas they used to import and they used to open letter of credit for 6 months in advance, and then there was always an issue that minimum order quantity should be 5,000 tonne.We are delivering material to their sites. Even 500 tonne material, we are delivering. So it is like Amazon concept. So whatever people need, we are in a position to supply on time. So as you have seen the EBITDA margins, up 31%. The overall [Audio Gap] on console basis, we could do INR 2,702 crores of EBITDA, and on a stand-alone basis, INR 2,435 crores, so which is a record, perhaps we are the highest EBITDA generating today in the steel company -- in the steel industry, and we are the lowest cost producer in the whole world.And this is what we want to maintain. The company is doing extremely well at labor front, at employees front. We are very much comfortable. We are perhaps the only company in the country who have not deducted salaries during COVID time, and we have paid people on time. We have not restrained on anybody. And we could take care of the society. We could take care of ourselves and we could manage and we could steer the organization in a right way.Initially, in the beginning of this year, we were dependent on exports because domestic market was closed. So we had export of about 1.35 million tonne in first 4 months, that is April, May, June, July. And after that, we have tapered off the exports. And now our -- earlier, it was 70% to 72%, came down to about 56%, came down to 45% and now in October, it is only 32%.And in November, we'll be just exporting about 20% of the total produced and that we will maintain till the end of the year. And this is because the domestic market is pretty good. Earlier, for exports, we were primarily selling semis. Now these whole semis are being converted into finished goods, value-added goods, and we are not selling semis at all now.So whatever we are exporting like plates in exports, we are doing to Europe, then beams to Europe as well as South Africa, rails to the adjoining countries like Sri Lanka and Bangladesh. And we're also exporting to Saudi Arabia for the TLT, that is transmission lines, and that is specialty high steel, steel angle irons. So that is our major market now. So we'll continue reaping the benefits of the value-added steel, and this is what our aim is.So coming back on the overall plan for the year, 7.3 million tonne, but we'll be trying for 7.5 million tonne as against of 6.5 million tonne last year. So this will be about 18% to 19% of growth, which is a phenomenal growth.I'm also pleased to inform you that in the whole world during COVID time, there was a negative growth except for the China. China had a 6% positive growth, whereas JSPL had 11.4% positive growth. In India, all of the steel mills, they were at a negative growth, but we were at positive growth at that time also.So I would say that the company is doing extremely well, so is the power business. Power business is just getting back on the track. But the solar, wind energy and hydro, they are still very active, and the state electricity boards have not come back to buy in full. So we are just waiting. The Government of India, they releases more funds and state governments they try to buy more electricity then I think it will be good for the nation.Now you have seen this economic revival in the country. Today, news is that we could do -- the India as a whole could do more than INR 1 lakh crore of GST collection, which used to be -- the maximum peak was INR 1,14,000 crore. I'm sure in the Diwali month or November, we'll cross INR 1,10,000 crore, that means the money is changing hands and the purchase power is increasing.The another good thing is that the first time in the history of the country, the ATM's withdraws are lower than the payments made through the cards, so that means the e-economy and the plastic economy is working very well. That shows the people they have the money and they are interested in spending money. So the spend management is quite lucrative now. So we are expecting that the steel consumption will further go up.Then at international front, I would like to inform you that the coking coal prices have gone down from $128 to $104 FOB in the last 30 days' time. And that has allowed us to book our orders for coking coal. We have done a forward booking up to February, and we are expecting that the pricing would be hovering around about $105 to $110. And the moment the prices they go up in the month of December or January, so we will reap those benefits because we've already booked the orders up to -- purchase orders, we've already placed the orders up to February consumptions.So this is all what we are doing. The coal gasification unit is doing very well and so is the DRI. And we are now looking at the coal availability by Government of India, Mahanadi Coalfields as well as Coal India that has increased. The coal prices have also come down, thanks to Mr. Modi, our Honorable Prime Minister, who has asked them to produce about 1.5 billion tonne of coal as against over 800 million tonne as of now.So if they produce 1.5 billion tonne, then the benefit will definitely come to the steel industry and especially to us because we are the only company today in the country having a coal gasification unit.The other area is the coal mining. We are trying to buy coal mines, if it is possible. But otherwise, if it is not possible, then still we are comfortable. Then the other area is the iron ore. Iron ore today, fortunately, we are at a location in Odisha and also Chhattisgarh. So for us, the iron ore is not in shortage. We are doing very well. We are getting material from all over the country. We have our own iron ore mines also, as you know, Tensa mines, but it giving us about 3.3 million tonne. We have more than 7.5 million tonne material lying in the premises of SMPL, that is Sarda Mines.And this -- there was a little turbulence in last 1 week, but I'm sure that from today, the dispatch code that will be released so that we can continue our operations and we can bring our material, which is lying, which was cleared by Honorable Supreme Court in the month of January, and we could start our operation from February end.So we have about 7.5 million tonne. So this 7.5 million tonne in this financial year, we'll try to take out. We consume about 1 million tonne from that stock per month. So hopefully, next 6 to 7 months' time, this all 7 million tonne will be back to JSPL, which is already duty paid, royalty paid material. So I think things will be better.We consume about 12 million tonne iron ore in a year. Out of that, 3 million tonne -- 3.3 million tonne will come from our own Tensa mines, 7.5 million tonne, we'll be bringing from one of our old stope, which is stocked in the premises of SMPL, balance about 1.5 million to 2 million tonne. We have so many other suppliers in the area, we can buy, there's no problem.So at railway front, the Government of India has done a wonderful job that rails are available on coal. That is something very good. So we are in position to move our material without any pileup of inventory.So this is all from my side. And while we discuss during the day, in the next 1 hour, if there's any question, I'll be happy to reply you. Thank you so much.

[Nishant Baranwal, Head of Investor Relations]

I'll pass the call to Mr. Sinha. Sinha?

[Akhauri Rajesh Sinha]

So hi there. Good morning, ladies and gentlemen. You heard Mr. Sharma, our MD, and our flagship company, JSPL, continues to do exceedingly well. But I must say that I can't say the same thing about our power company JPL. We are doing okay, but not what we wanted to. And the power sector in the country, as all of you are aware, continues to be subdued. And there is hardly any gap left today between the availability of power and the requirement of power.In fact, this is not the scenario today. I mean this trend has been continuing for last 1 year now. Country produced close to about 1,300 billion unit in the last year. And the demand was close to about 1,290 billion unit. So in fact, there was time when the supply exceeded demand. And in this half year ending September, India has already produced about close to 673 billion unit. And the demand is not going up.Now this is the pressure on the selling price. And if we look at the selling price at our RTC Power Exchange, you will see that the price -- average price has been hovering around INR 2.35 per unit, INR 2.50 per unit. And this has impacted not only our company but almost all the generators across India. And that is also the reason that why, if you look at the overall installed capacity in India, which is approximately about 373 gigawatt. Last year, I'm talking September to September, hardly addition of about 10 gigawatt has been made. And out of this 10 gigawatt, 3 gigawatt has come from thermal coal sector, where the capacity has gone up from 203 gigawatt to 206 gigawatt.Solar has contributed about 5 gigawatt from 31 to 36 gigawatt that is the total installed capacity country has. And what each has come from wind and hydro, where hydro has gone up from 45 gigawatt to 46 gigawatt. So altogether, the situation continues to look quite grim.Nonetheless, JPL did give good EBITDA. And I will come to the financial figures later. And I have to wear another hat as Director of Finance, this was the hat I was wearing as the Chairman of JPL and I have to wear another hat as Director of Finance of JSPL. So I'd like to first go through the financial parameters and financial results of JSPL followed by the financial results of JPL.So coming to -- just adding to a little bit more to whatever MD sahib said. And you are aware that the JSPL recorded a turnover of INR 8,677 crores on stand-alone, which is 29% increase on quarter-on-quarter basis. And EBITDA went up by 33% and stood at INR 2,435 crores. And the PAT went up from INR 505 crores to INR 998 crores, recording a growth of almost 98%.So I must say that the results have been spectacular. And the EBITDA this quarter has been ever highest in the history of JSPL. We never had this kind of an EBITDA before. And this becomes more important because in these trying times, when our peers are nowhere near us, performance is concerned. In these trying times, our EBITDA, our PAT, our turnover, they have shown phenomenal growth, literally phenomenal. So I really feel proud about that. I don't want to sound immodest, but this kind of a performance, not only in India, we have not seen worldwide this quarter.Coming to sales volume and stand-alone, like what our MD sahib said that it went up by 22%, and we recorded a sales volume of 1.93 million tonne. And on a consolidated level, it stood at 2.40 million tonne. So for the consolidated turnover is concerned, it has stood at INR 9,804 crores, showing a growth of 24% on Q-on-Q basis. And EBITDA stood at INR 2,702 crores, showing a growth of 23% on quarter-on-quarter basis. PAT went up from INR 291 crores to INR 903 crores on a consolidated basis. So you will agree that -- and if you look at our peers, I'm proud to say that we are far ahead of them today.Now if we compare the same results on year-on-year basis. So our -- coming to JSPL, our EBITDA went up by 94% from INR 1,255 crores to INR 2,435 crores year-on-year basis. So INR 4,221 crores and the corresponding quarter last year, the figure I'm comparing. And our JPL, where we are almost at the same compared to what we were in the quarter 2 last year. In fact, there is a very minor dip in our EBITDA, just 1% to 1%.On the overseas front, it is not looking very healthy at this point of time. But nonetheless, we are taking measures to divest our overseas assets, like the market is aware, we have already taken the steps so far one is concerned. And down the line, we have envisaged that gradually, we will keep divesting our overseas assets, and we'll focus on our core strength, which is steel.So this is what I have to say about the JSPL. And coming to JPL, give me a second. So for JPL is concerned, in quarter 2, we produced 2,744 million units, and we sold off 2,550 million units. I'd like to give you a quick classification of where did we sell our [ products. ] And the PLF also went up in that. Yes, so like what I said that we do not have much to show upside on the JPL front. And whatever PPAs we had close about 1,080 that -- we hope that, that will continue to remain same because the PPAs which we have signed earlier did not went through. We could not sign. The new PPA, also, we are not very hopeful that when this will be signed because already 7, 8 months have passed since we won the bid. So this is the overall scenario about JPL.And now we will be open to questions. So Nishant, over to you now.

[Nishant Baranwal, Head of Investor Relations]

Thank you, sir. We will open for lines for questions and answers. My humble request here would be, please limit your questions to 1. And also, kindly I'll urge you and request you to ask more strategic questions. We, at IRR, always there to provide you with the data. Operator?

[Operator]

[Operator Instructions] The first question is from the line of Amit Dixit from Edelweiss.

[Amit A. Dixit, Financial Analyst]

And congratulation for a good set of numbers. My question is with respect to debt. If you can walk us through the -- how the net debt level was reduced? I know there is a waterfall chart, but apparently, it is not very clear. So if you can walk us through that net debt reduction level? And also, why interest cost went down significantly in this quarter, both Y-o-Y and Q-o-Q?

[Vidya Rattan Sharma, MD & Additional Executive Director]

Thank you very much. We started with INR 35,000 crores of opening debt in the company. And after divestment, the debt comes down to INR 29,500 crores. We already paid in this particular H1 about INR 2,600 crores to the banks. We have planned to pay another INR 2,400 crores in the next H2. And once we do it, then finally, we'll land somewhere about INR 24,500 crores by the end of the year or opening of the next year. So this is what our plan is.Interest rate has been reduced. If you see that overall, we could negotiate with the banks wherever we had interest more than 2 digits, so we could find out, and we could negotiate with them to bring it down to less than 2 digits, I would say less than 10%, somewhere about 9% also, 9.5% also. And we'll continue talking to the bankers to reduce it further. We are also looking that our rating should be improved further after seeing all these results of Q2. And I hope I replied to your question.

[Operator]

The next question is from the line of Prashant Kumar (sic) [ Prashant Bhonsle ] from InCred Capital.

[Prashant Bhonsle, CEO of Education & CMO]

Sir, my question is to do with our core assets and noncore assets. Sir, our...

[Operator]

Sir, sorry to interrupt. Mr. Kumar your audio is not quite clear. We are not able to hear you.

[Prashant Bhonsle, CEO of Education & CMO]

Hello? Is it better now? Hello?

[Operator]

No, sir. The audio is still bad. I would request you to please come back in the question queue.The next question is from the line of Rahul Jain from Systematix.

[Rahul Jain, Vice President of Metals & Mining]

Sir, you gave a guidance for the volumes for the second half. Sir, how should we look at for the next year because I think we are achieving now our rated capacity. And as a group, we have focused on deleveraging. And so should we see that very -- what you can add is only through debottlenecking?

[Vidya Rattan Sharma, MD & Additional Executive Director]

No, I'll tell you, we will be ending somewhere about 7.3 million to 7.5 million tonne by the end of this particular year. And we are not doing any CapEx. And we have some -- still some margin. If you see this area where the section weight, sizes, they play a very vital role, like we have a 5-meter white plate mill. If you produce more than 3 meters, that is more quantity, that means we can increase the capacity. We are today the largest plate manufacturer in the country. And similarly, the sections like angle iron, channel, all these sections, when we go for the heavy sections, we can increase the production. So what we are doing, we are now working that which are those products which can definitely bring higher EBITDA and simultaneously, we can increase the productivity. So our blast furnace site in Angul is running now at 10,000 tonnes per day. We are going to produce about 11,000 tonnes plus per day with little more modifications. And since we are not adding any CapEx, so whatever we will do we'll do by filing with the existing operations. So this is what our game is.

[Rahul Jain, Vice President of Metals & Mining]

No, sir, some color for next year? I mean, you think that...

[Vidya Rattan Sharma, MD & Additional Executive Director]

We'll be touching about 8 million tonne.

[Operator]

The next question is from the line of Kamlesh Bagmar from Prabhudas Lilladher.

[Kamlesh Bagmar, Research Analyst]

Sir, [indiscernible] going through your [indiscernible] balance sheet. If I see the trade payables, sir, which has come down by roughly around INR 600 crores. If I see other current liabilities, that has come down by roughly around INR 800 crores, despite the fact that like our [indiscernible] has gone up. So I'm really surprised that how trade payables and the current liabilities...

[Nishant Baranwal, Head of Investor Relations]

Kamlesh, I would request you to repeat your question, there's a lot of distraction.

[Vidya Rattan Sharma, MD & Additional Executive Director]

We could not understand the question fully. I think there's some problem, technical problem. I request you, please repeat it. Or otherwise, you can go to the question and come back later.

[Kamlesh Bagmar, Research Analyst]

So I'm saying that in the [ other current liabilities, ] the figure has come down roughly around INR 800 crores as compared to the March '20 figure. And even if we see the trade payables that has also come down by roughly around INR 600 crores as compared to the March level. So why there has been such [indiscernible] that has resulted in our debt numbers not going down that significantly?

[Vidya Rattan Sharma, MD & Additional Executive Director]

So Kamlesh, just to repeat your question we understand clearly, you're asking about the trade payables going down by INR 600 crores?

[Kamlesh Bagmar, Research Analyst]

Yes. Yes.

[Vidya Rattan Sharma, MD & Additional Executive Director]

In the first half?

[Kamlesh Bagmar, Research Analyst]

Yes.

[Vidya Rattan Sharma, MD & Additional Executive Director]

So basically, Kamlesh...

[Kamlesh Bagmar, Research Analyst]

Trade payables and other current liabilities.

[Vidya Rattan Sharma, MD & Additional Executive Director]

Right. So Kamlesh, basically, what we have done is that whatever trade payables we -- were there, we have made repayments or supplied materials against those things. And therefore, the trade payables have come down. The endeavor will be to bring them down sequentially quarter after quarter.

[Kamlesh Bagmar, Research Analyst]

And about current labilities?

[Vidya Rattan Sharma, MD & Additional Executive Director]

Yes, please. Next question please.

[Operator]

The next question is from the line of Subhadip Mitra from JM Financial.

[Subhadip Mitra, Power Analyst of Institutional Equities Research]

My some question is pertaining to Jindal Power. Just wanted to get some color on pilot 2 PPA status. I understand that we had [indiscernible] megawatt, 105 megawatt that was bidded for. If you can just give us an update on that?

[Vidya Rattan Sharma, MD & Additional Executive Director]

Come again please? Please repeat your question. Actually, the voice was not very clear. I understand that you are asking the PPA for the rest of the year?

[Subhadip Mitra, Power Analyst of Institutional Equities Research]

Correct. And lastly with regards to the pilot 2 PPA status, what is the color? What is the status of the pilot 2 PPA, if any?

[Vidya Rattan Sharma, MD & Additional Executive Director]

Yes, I'll tell you. We bid for 420 megawatts in February '20, and we got that 420 megawatt, the aggregator was PTC. But somehow other because there is not much demand from the DISCOMs, so we have not been able to sign the PPA. And chances are not bright because it's the second time to say the same story is getting repeated. If you'll recall, we had signed a 515 megawatt PPA when the NHPC was aggregated in 2019, which could not materialize, which we could not sign and that was shelved off. And the another under pilot 2 scheme, 2,500 megawatt was put for sale and the aggregative was PTC where we got 420 megawatt, but there's still no PPA has been signed. So I do not see that this is going through in the near future. So we are not very optimistic about it.

[Operator]

The next question is from the line of Prit Nagersheth from Wealth Financial Advisors.

[Prit Nagersheth]

Yes. Can you hear me?

[Vidya Rattan Sharma, MD & Additional Executive Director]

Yes.

[Operator]

Yes, sir.

[Prit Nagersheth]

Okay. Can you give us an impact on the iron ore mine that you had won? And on this some showcase notice has come out. Could you give us a picture of what is going on there and what the trend is?

[Vidya Rattan Sharma, MD & Additional Executive Director]

So thank you. Yes, it is a question which I was expecting from anyone of you. You see this mine name is Guali mine. Actually, we won this mine, but unfortunately, when the possession was likely to be given, we found that there's a mismatch in the physical possession and -- versus the drawings. So we discussed with the Government of Odisha that you please rectify because we cannot take some liability tomorrow that we start functioning the mine and then finally somebody comes and stops us that, "No, you are -- illegally you are doing the mining." So this is the reason we have raised our concern to Odisha government. And of course, they have given a show cause. We already replied that our reason is this, either you correct it or we cannot take it.

[Prit Nagersheth]

Okay. So what will be the outcome of this? Will you see the mine going back? Or do you see that the correction is happening and then we are still being able to use that iron ore?

[Vidya Rattan Sharma, MD & Additional Executive Director]

Actually, we have taken the opinion of various legal authorities and legal advisers, and Government of Odisha is also taking. It is very difficult for them now to recorrect it because for over the last 15, 20 years, this was going on as it is without any map. So there's a mismatch in the map in the total mining area. So -- because upside, there is something -- some forest, downside equivalent to forest, they have started mining the downside, which was not acceptable to us because it's not as per the layout. So this is the reason. Now it is up to the government because we cannot decide on behalf of government. If they rectify it, welcome, then we will take. If they don't rectify, then they have to offer us some alternate.

[Operator]

The next question is from the line of Jimesh Sanghvi from Principal Mutual Fund.

[Jimesh Sanghvi, Senior Research Analyst]

Sir, if you can throw some light on the next phase of growth for the steel business? I understand you guided that probably next year, we are targeting around [ state mills ] in terms of volumes, but considering that we are deleveraging our balance sheet next year also the iron ore sourcing might get exhausted at Sarda Mine, like the low-cost ore that we have already paid for. How should one look at the steel business, in particular, for next financials, both in terms of iron ore sourcing as well as kind of any CapEx that you might be considering steel business? If you can throw some light on that from a longer-term perspective?

[Vidya Rattan Sharma, MD & Additional Executive Director]

Yes. Thank you very much. Very right question in today's context. The issue is, first of all, iron ore availability is in abundance today in the country. There were some problems because of the very heavy rains and mining was disrupted. The other problem was because the iron ore mines have changed hands and the new promoters have come and it takes a little time to ramp up the production.The other is because the old iron ore owners -- mine owners, they are holding the stock, now they are clearing their stock because they have to clear their stock within 6 months' time. So that has put some problems in the country. But we -- since we are in Odisha and also in Chhattisgarh, so we didn't face this problem.We have our Tensa, our own mines that produces about 3.3 million tonne. We have more than 7 million tonne of stock lying in the premises of SMPL. We consume about 1 million tonne per month. So out of 12 million tonne every year, so we are covered for about 10 million tonne and balance 2 million tonne we can buy from the vicinity of our plants. So it should not be any problem because Odisha Mining Corporation, OMC, we have an MoU with them, and they are ready to supply whatever quantity we want to buy. And there are some private miners as well, those who are in the very close proximity of our plants so that we can bring the material at a very low freight cost. So this is what we are doing now.

[Jimesh Sanghvi, Senior Research Analyst]

So basically, you mean to say that once the Sarda ore and everything is over, the 7 million or 8 million tonne, which is lying, probably we will be largely dependent on merchant for sourcing, right?

[Vidya Rattan Sharma, MD & Additional Executive Director]

Yes. You're right. This is the reason we are trying to acquire another iron ore mine. And this is the reason we participated and we got this Guali mine, but unfortunately, because of the technical reasons, we couldn't start it. And I'm sure, Government of Odisha will definitely consider it and they may rebid it and with a correction in the map or we'll try to participate in some other mines, which are likely to come for the auction in very short time.And since we have been maintaining our production in the last 6 years' time, when the SMPL was not functioning, so it didn't impact our business. So our business will continue. There is no issue at all, and there's no shortage of mine, no shortage of iron ore.As far as the overall production is concerned, the growth in steel industry is likely to be more than 5% year-on-year basis, and we'll not be surprised if the growth goes a little more than 5%. And JSPL has done a growth of 11.4%.

[Operator]

[Operator Instructions] The next question is from the line of Chintan Shah from Investec.

[Chintan Shah, Research Analyst]

Sir, I just wanted an update on Sarda Mine, basically, on fresh mining front, I mean, what's the legal status on that? And suppose if [ SMPL ] fresh mining doesn't start and you don't have access to inventories, then what's your backup plan for that?

[Vidya Rattan Sharma, MD & Additional Executive Director]

Yes. Thank you very much. There was a decision by Honorable Supreme Court in the month of end of January. After that, the SMPL, they started their operations, and it's going on very well. Barring some issues in last 2 weeks' time and with some local authorities registered the mine and they have advised them. And also, they all issued a show cause that how to stack the material.So those things, I'm sure SMPL must be taking care, and we are not impacted because of this. There are more than 20 customers, so we are one of them. And these are the normal issues in any mines. And since India is a very large economy and always minerals is in a very hot talk, so this happens. There's no problem. I'm sure this will be resolved very soon.

[Chintan Shah, Research Analyst]

Okay. And sir, if I could squeeze in one more question. If you can provide update on basically when can we expect Oman full and final sale based on that and if there are a procedural legal hurdles that we anticipate or there are currently?

[Vidya Rattan Sharma, MD & Additional Executive Director]

Yes. My colleague, Mr. Nishant will reply you. Just a minute.

[Nishant Baranwal, Head of Investor Relations]

Chintan, thanks for asking that question. I think in our initial estimate, we did think that we'd be able to do it a lot earlier. But as you know, a transaction with this size does take its time, especially in these COVID times. So I believe there are no legal hurdles or anything that are there. The only last few approvals are to come, and therefore, we believe we should be able to complete this within the third quarter.

[Operator]

The next question is from the line of Gaurav Rateria from Morgan Stanley.

[Gaurav Rateria, Research Associate]

Sir, 2 questions. One is, any update on status of refinancing of the JSPML debt? And would you have permission from the Indian lenders to transmit money overseas, just in case if it is not getting done by March?And second question is more on a strategic line, at what point in time or at what debt levels would you like to reconsider the CapEx or the expansion plan for JSPL steel operations?

[Nishant Baranwal, Head of Investor Relations]

Sure. Gaurav, let me take your first question, which was regarding the refinancing. As we've already said, so first of all, you'd be happy to know that in the past 6 months, we paid more than $200 million of overseas debt. Just pointing that out because the March repayment that you're talking about is just $250 million. And these 6 months are the better half for the steel industry in the country. And therefore, we do not foresee any problems in paying up the $230 million that's upcoming in March. Having said that, we've already spoken to the markets, and we have pointed out that we would be looking at refinancing it through a USD bond deal. It is in the works. And as and when we advance, we're going to come forth. If that answers your first question. If you'd repeat your second question, please, Gaurav?

[Vidya Rattan Sharma, MD & Additional Executive Director]

CapEx. The second question you've asked, I think, for the CapEx in the steel plant. Our Board has taken a decision not to invest for the expansions till we bring down our overall debts. So our first aim is to bring down debts to a very reasonable level of about INR 15,000 crores, which is likely to come by 2023 as for today's plan.And once we are working on this and we bring down our debts by below INR 15,000 crore, then only we will think for the next CapEx, otherwise, we will not think of the CapEx.

[Operator]

The next question is from the line of Vikash Singh from PhillipCapital.

[Vikash Singh, Vice President of Metals & Mining]

Sir, this -- I see in your cash flows that you have extended somewhere around INR 1,300 crore soft loans to your subsidiaries. So can you just explain, which subsidiaries we have given this loan? And after Oman hive off, how would this figure would change?

[Nishant Baranwal, Head of Investor Relations]

So Vikash, this is a data question. I would urge everybody to please ask more strategic questions. These can be taken up by the IRR team separately. Just for your question, regards like we said, we paid off debt in Mauritius, and this was extended to Mauritius for the payment.

[Vikash Singh, Vice President of Metals & Mining]

So with Oman going off, how this station would change, will we get this money come back? Or it would get existed against something?

[Nishant Baranwal, Head of Investor Relations]

Vikash, this was for payments in Mauritius and Australia.

[Operator]

The next question is from the line of Bhavin Chheda from Enam Holdings.

[Bhavin Chheda, Analyst]

Congratulations for exceptional numbers, overall operational...

[Operator]

Sorry to interrupt, Mr. Chheda, the audio is not quite clear.

[Bhavin Chheda, Analyst]

Can you hear me now? Hello?

[Operator]

Sir, you can go ahead, please.

[Bhavin Chheda, Analyst]

Can you hear me now?

[Operator]

No, sir, not very clear.

[Bhavin Chheda, Analyst]

Hello?

[Operator]

Sir, the audio is not very clear. I would request you to please come back in the question queue.The next question is from the line of Vishal Chandak from Emkay Global Financial Services.

[Vishal Chandak, Research Analyst]

Am I audible?

[Operator]

Yes, sir.

[Vishal Chandak, Research Analyst]

Yes. Sir, my question was with respect to the Guali mines. We have been at a premium of 144%. And since the time we have bid for the mine, the iron ore prices have run away by about like INR 1,000 per tonne. So how do we plan to -- in case the Government of Odisha rectifies the defects in the mining plan and the maps and we still end up owning these mines, how do we plan to bring down our overall iron ore cost because when we compare to the Sarda ore coming to the Guali mine's ore, this could be a quantum jump in the cost of iron ore? And if the iron ore cost is going to remain the same, what kind of differential do we see?

[Vidya Rattan Sharma, MD & Additional Executive Director]

Yes. Thank you very much. We put this bid on the table after having a very, very good due diligence and after considering everything. But the point here is, it's not a matter of cost to premium, it's a matter of that legally can they rectify it or not? We feel that they cannot rectify. They have to go for rebidding. This is one.Number two, in case they rectify, then we have a very comprehensive plan to transport the Guali mine's material through pipeline, that ancillary pipeline and which is going to make us very, very competitive in terms of cost of iron ore to our steel plant. I hope I replied you.

[Operator]

The next question is from the line of Pallav Agarwal from Antique Stockbroking.

[Pallav Agarwal, Research Analyst]

Sir, I just had a question on the Shadeed divestment. So the entities that are buying this, Templar and Vulcan, so we would not be extending any advance to them, right? So they would be funding this quoting from your own sources of funding? I just wanted to clarify that.

[Vidya Rattan Sharma, MD & Additional Executive Director]

Yes. Our CFO and our Director of Finance, Mr. Sinha, is going to reply you on this.

[Akhauri Rajesh Sinha]

Yes, what you said is absolutely right, we are not funding. It is coming to the company from its own resources. So JSPL doesn't have to do anything with this funding.

[Pallav Agarwal, Research Analyst]

Sure, sir. Because I think in the Sarda mine's case, what -- I mean I don't know whether my understanding is correct that we've extended an advance to them and against that, we get the raw material, right? So as we lift mines -- life iron ore from them, we are adjusting the advance against that. Is that a correct understanding of that?

[Nishant Baranwal, Head of Investor Relations]

I think you have taken there, Pallav. So like we've always said, that 12 million tonne that belongs to JSPL, there is no advance that belongs to JSPL, which was paid for earlier. The advance that -- the adjustment which you're talking, we are buying from SMPL and other miners. And wherever we've extended advances, we generally adjust that towards it.

[Operator]

The next question is from the line of [ Sachin Roy from B&K Securities. ]

[Unknown Analyst]

Congratulations for the great set of numbers. I have only 1 question, sir. That is -- if you get the coal asset and how that will improve the working of power business?

[Vidya Rattan Sharma, MD & Additional Executive Director]

Yes. See, if we get the coal mine, our core cost will come down. Right now, we have secured about offtake of 3.1 million kind of fall, which is kind of beneficial -- I mean, a good situation for us to be in. And if we get coal mines, probably our coal cost will come down further. So right now, we have about close to 1.77 per kilowatt coal cost. And we expect that if the coal mine comes and we start doing the coal mine, then it will lower our costs. How much exactly, we are not in a position to pinpoint, but it will definitely come down.

[Unknown Analyst]

Okay. And if you don't mind, I can -- I just wanted a follow-up question.

[Nishant Baranwal, Head of Investor Relations]

Yes.

[Vidya Rattan Sharma, MD & Additional Executive Director]

Yes, Go ahead.

[Unknown Analyst]

Yes. Actually, I have 1 follow-up question that lastly, you mentioned that it was Guali mine came into the place when the premium that you are saying that 144% that will compensate, but by the slurry pipeline that you are going to commence. So what is the magnitude? Means, what is the amount that will compensate with that premium if you convert that transportation by slurry pipelines and all?

[Vidya Rattan Sharma, MD & Additional Executive Director]

You see the iron ore -- yes, the iron ore is -- today, if you see is available in abundance, number one. Number two, if we compare with the international prices of iron ore, Indian prices are still very low. So we are not facing any challenge, and we don't foresee any challenging times to come in the country because we have more than 20 billion tonne of iron ore in this country.So the slurry pipeline, given advantage of at least minimum INR 1,100 a tonne, so which is a substantial money at a product of having INR 4,000 per tonne of value. And if you get INR 1,100, just on the transportation advantage, then you can image it is around 25%, so there's no problem at all.

[Operator]

The next question is from the line of [ Bajraj Nahar from Mini Consultant. ]

[Unknown Analyst]

I have 1 question. In your earlier presentation, you have described that you have 3 mines in Africa regions and quality of that iron ore is really the world's best quality. When those mines are likely to be operational?

[Vidya Rattan Sharma, MD & Additional Executive Director]

Yes, thank you very much. [Audio Gap] iron ore mines, hello, so these are the magnetized iron ore mines and these are really -- it's a very good ore. But there are 2, 3 things in it. One is today the situation is the India growth story. Till yesterday, it was not India growth story. Yesterday means in the last couple of years. But now the country's focus is on India growth story. Government is supporting, and we are going to produce in this country and consume 300 million tonne steel by 2030.This 2030 300 million tonne means the gap today is about 160 million tonne capacity to capacity. And somebody will have to produce this 160 million tonne to bridge the gap in 10 years' time. And as you know, that steel plants take about 5 to 6 years' time to start production. So today, we are -- what our aim is that by 2024, '25, we should start working on the new plant or the capacity build up which if we are successful and if we reduce our debt level. And our main aim will be to bank upon the Indian iron ore and to produce more and more steel.As far as the Africa is concerned, these 2 mines are very good assets. And the market price is also very good. Today, iron ore is about $110, $112 a tonne in China C&F. So we are looking some partners who can start these mines and take the material to rest of the world instead of bringing to India. So this is what in our pipeline is.

[Unknown Analyst]

Yes. Just 1 more point, a follow-up point that in my assumption that if you can -- because your stance from the port in one of that mine is only 90 or 100 kilometers, so the cost of your ore even to India importing from those mines will be less than the premium you are going to pay on the auction money? So are you considering like that on war-footing buses or just a normal basis you are going on?

[Vidya Rattan Sharma, MD & Additional Executive Director]

Yes. We are going on. This is the reason we did this bidding. And everything thing is on paper, everything is well calculated. If we transport iron ore from Odisha to our Angul plant by slurry pipeline, which is now talk of the town, the Government of India is supporting, the Indian Railway is supporting, giving corridor and Indian Highways Authority, they're also giving corridor. Our pipeline layout is approved, project is approved, and we are going to start this project as soon as there is a clearance or there is some light at the end of the tunnel for the mines. So this is what we are going to do. And the Indian iron ore is cheaper than bringing the iron ore from rest of the world.

[Operator]

[Operator Instructions] The next question is from the line of Prit Nagersheth from Wealth Financial Advisors.

[Prit Nagersheth]

Hello?

[Vidya Rattan Sharma, MD & Additional Executive Director]

Yes, please.

[Prit Nagersheth]

Yes. Sir, you mentioned that the kind of EBITDA that you've seen in quarter 2, now given the kind of changes in iron ore that are there, do you think we'll be able to maintain this EBITDA trend in quarter 3 and quarter 4?

[Vidya Rattan Sharma, MD & Additional Executive Director]

Yes. You see, quarter 3 and quarter 4, our aim is to further elevate the EBITDA level from INR 12,600 a tonne to maybe more, much more. Reason, we are now very selective in our product mix. So the ore -- the other point is, number two, the economy of scale is working very well. And since we are ramping up the production, we are debottlenecking wherever it is possible. So we'll be in a position to maintain the EBITDA on plus side. I do not want to give any number or rosy picture today, but our aim is pretty good, like from INR 11,700 to INR 12,600 we have ramped up in last quarter, Q1 to Q3 -- Q2. So Q2 to Q3, and then finally, H1 to H2 will be much higher as per our plans.

[Prit Nagersheth]

Okay. One last question is regarding power, there were some plans to demerge the power division. So can you give any color on that?

[Akhauri Rajesh Sinha]

See, there is a good opportunity, then yes, why not? We are looking for a good opportunity. And if it comes our way, we will definitely do it. So giving you a time line, it may not be possible, but we are looking for a good value for our company. As and when we get it, we will divest.

[Operator]

The next question is from the line of Abhijit Mitra from ICICI Securities.

[Abhijit Mitra, Analyst]

First is on iron ore mine, which we have won through auction [indiscernible] that you are pretty sort of confident...

[Operator]

Sorry to interrupt. Mr. Mitra, the audio is not quite clear.

[Abhijit Mitra, Analyst]

Yes, yes. Is it clear now?

[Operator]

Yes.

[Abhijit Mitra, Analyst]

Yes. So I was saying that given the issues with the boundaries at Guali, I mean can it create a bigger disruption in the area because what we have made to understand is that not only the boundary of this mine is sort of off the chart given the adjacent that dozen mines of [indiscernible] which has gone to other competitors, that's also sort of taking an issue. So can it lead to a bigger disruption for an extended period of time? Would love to know your thoughts?

[Vidya Rattan Sharma, MD & Additional Executive Director]

We are -- actually, first of all, we are concerned about our own business. We do not want to look into the other business. So we are expecting that if Government of Odisha, they rectify the coordinates and they rectify the layout and map, then it is worthwhile to do the business.And iron ore, as I told you, in the country, it's more than 20 billion tonnes. And barring last few months when it was rainy season, there was some problem and disruptions. But now -- and the mining companies, they were -- they changed hands and new investors have come in the country. So it was taking some time. But I think over a period of time in next 2, 3 months, things will be streamlined, and there will not be any shortage of iron ore.

[Abhijit Mitra, Analyst]

Okay. Okay. And second question is on [indiscernible] DRI plant. So I don't know whether you have shared this number, but in the quarter gone by, which is Q2, what has been your production rate? And what are the triggers to further improve the cost of production? If you can also highlight the current cost of production, profitability from the plant and plants that you have for the next few quarters, that will be great?

[Vidya Rattan Sharma, MD & Additional Executive Director]

Yes. We are producing DRI at a rate about 4,000 tonnes per day, and we are going to ramp it up to 6,000 tonnes per day very shortly. And the cost of production, when we see DRI of -- through the conventional sponge iron, rotary kilns versus DRI through the coal gasification. As of now, there's an advantage even at 4,000 tonnes a day, we are at least 5% cheaper than the conventional sponge iron plants. And we generate electricity. Apart from that, we also generate some of the very specialty chemicals from the coal gasification, like [ car phenol, ] bisphenol, ammonia and many other items. So we are pretty sure that in times to come, this will be adding to the bottom line further, and we'll be generating a good EBITDA level.

[Operator]

[Operator Instructions] Next question is from the line of [ Ashish Kejriwal from Dam Capital. ]

[Unknown Analyst]

Sir, quick 2 questions. One is on Sarda mines advance premiums which we have done, which was around INR 1,250 crore at the end of FY '20. What could be your status now at the end of first half?And secondly, over the last few months, we haven't heard anything about monetization of overseas assets like Botswana or Australian mine and other things. So what's the status on that, sir?

[Nishant Baranwal, Head of Investor Relations]

Thanks, Ashish. So as you would have seen in our numbers that the advance has gone down by around about INR 400 crores to INR 500 crores. And as we procure more material from SMPL, as they mine, it'll go down further. As far as divestments of overseas assets is concerned, yes, that is the focus now to bring down the debt in the overseas entities. If you would remember in FY '19, we were at $1.9 billion. As of March, we were at $1.8 billion. If we look at it today, it's just $800 million, which will come further down once we divest more assets.You mentioned Botswana. Yes, Botswana has been there on the block. We're trying to increase the value of Botswana as we've illustrated before by getting a PPA also. That would help us monetize it at a better value. The earlier deal, which we had signed for $160 million, actually got terminated because the buyer did not take. I hope that answers your question?

[Unknown Analyst]

Yes. Yes. And once again, congratulations on the good set of numbers as well as forward booking of coking coal in this time, which is, I think, encouraging.

[Operator]

That was the last question. I would now like to hand the conference over to Mr. Sharma for closing comments.

[Vidya Rattan Sharma, MD & Additional Executive Director]

Yes. Thank you very much. Thank you, dear investors and organizers. I'm sure whatever your queries were, we have replied very well. In case of any questions left, you can always speak to Mr. Nishant, and he'll be pleased to share the informations or reply whatever you want to have.The company is doing very well, extremely well. And as I told you that we are at a level of INR 12,600 of EBITDA, as the 31% gross margin, EBITDA margin, we are the today #1 company in the country in our category and capacity. And I'm sure we'll maintain it. We'll be closing this year at about 7.3 million to 7.5 million tonne. Next year, we'll be crossing 8 million tonnes. This is all because of the product mix and debottlenecking the existing bottlenecks wherever it is there.We are not keen to put any money in the CapEx except for the routine maintenance or small fill in the blanks wherever it is required. The aim is to bring down the debt level to -- in the financial year 2022 to a level about INR 15,000 crore. We want to reach to 50,000, 5-0, INR 50,000 crore of turnover in 2022-'23, and we want to bring the EBITDA level to about INR 12,000 crores.Perhaps we will be one of the best companies in the country and world with our capacity and category when we have EBITDA of about INR 12,000 crores and the debt level is less than INR 15,000 crore with a total sales turnover of about INR 15,000 crore. There are not many company in the country, hardly 29 companies those who are there in the country having turnover of about INR 50,000 crores today, but all of them, they are not at the same debt-to-EBITDA level. So our aim is to bring the company to a healthier path, much more healthier path.And our new businesses, which are now approved by Government of India, like Head Hardened rails and 1175 grade of rails, they will bring more EBITDA and more money to the company. And the -- financially, the company is getting sounder and better, stronger day by day. We have good manpower. There's no exodus of manpower. And we have a very strong team available at the top management, middle management.There is a complete succession plan, people, those who are going to retire. So the colony, the townships that has helped us in running the plant during COVID time. So all of the actions taken by our management in previous years, they have given the dividend. And we are -- since our Angul plant is very close to the ports, so we are in a position to move the material to ports as fast as possible.And Indian Railways supporting well in transporting goods in, goods out, there are no issues. So if you see overall, the company is doing extremely well, and we are committed to maintain a very healthy balance sheet in times to come also. And we -- as you know, we have already done this divestment of Oman, and that has helped us in reducing debt level as a whole. And reaching to INR 15,000 crore or lower debt by 2022-'23 will be an easier walk now.So thank you very much. Thank you for listening. All the best.

[Nishant Baranwal, Head of Investor Relations]

Thank you, everyone.

[Operator]

Thank you. On behalf of Motilal Oswal Financial Services, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.