Jindal Steel And Power Ltd

NSE:JINDALSTEL

Earnings Call Transcript 2019-Q3

[Operator]

Ladies and gentlemen, good day, and welcome to Jindal Steel & Power Limited Q3 FY '19 Earnings Conference Call hosted by Prabhudas Lilladher. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Amit Khimesra from Prabhudas Lilladher. Thank you, and over to you, sir.

[Amit Khimesra, Research Analyst]

Thanks, Zed. On behalf of Prabhudas Lilladher, I welcome you all to the Q3 FY '19 Results Conference Call of Jindal Steel & Power. Without much ado, I hand over the call to Nishant Baranwal, Head of Investor Relations at Jindal Steel & Power. Over to you, Nishant.

[Nishant Baranwal, Head of Investor Relations]

Thank you, Amit. A very good day to all of you. Today, we would like to welcome you to our conference call to discuss JSPL's Third Quarter and 9 months FY '19 Financial Results. Today, we have with us Mr. N.A. Ansari, our Joint Managing Director; Mr. Bharat Rohra, our CEO of JPL; Mr. Sudhanshu Saraf, our CEO of Steel; and Mr. Deepak Sogani, our CFO. We will begin by -- with Mr. Ansari to give his opening comments. Please.

[Naushad Akhter Ansari, Joint Managing Director]

So good day to all of you gentlemen. I am very pleased also to tell you, before I actually talk about the performance, that our management team has also now been extended. And we also have, along with us, Mr. Sudhanshu Saraf, who is now taking over as CEO of Steel business, JSPL. And he has excellent background in terms of making improvements in various industries and so on. So just to give you some idea about his background, he's an alumnus of IT-BHU, finished Metallurgical Engineering in '87. He holds Master Black Belt in Lean and Six Sigma and brings with him more than 30-plus years of experience in automobile. Out of that, I think 12 years plus, I said, and posts also in financial services sector for more than 8 years. And then he has also been a management consultant. So he has excellent credentials to work with this company. And together, this management team is now quite strong to really take this company forward. Now let me also tell you about the kind of performance which we had. As we had talked with you, quarter 3, of course, was a challenging quarter. We all knew what was happening in the steel industry in quarter 3. But I am very pleased to share our results with you that despite those challenges, JSPL's performance has been satisfactory. We have seen all the reports, I guess, we have available with you, but I just want to recap -- reiterate some of those items. The standalone PAT is now INR 177 crores. Consolidated PBT is INR 14 crores. Our standalone EBITDA has gone up 61% year-on-year to INR 1,400 crores -- what was that? INR 1,450 crores. And EBITDA, the consolidated EBITDA has gone up by 29% year-on-year. Our group steel production has gone up by 26% year-on-year to 1.22 million tonnes. And the sales has gone up by 28% to 1.2 million tonnes. Turnover is increased by 58% to INR 6,745 crores. And EBITDA, as I've mentioned, standalone basis is INR 1,480 crores, increased by 61% year-on-year. EBITDA margin remains at 22%. And the JSPL consolidated results, if you look at that, that turnover has gone up by 37% to INR 9,580 crores. And EBITDA has gone up by 29% to INR 2,077 crores. EBITDA margin remaining at 22%. Oman EBITDA is INR 32 million crores, which is relatively down, but we will explain that in the coming paragraphs. I will explain a little further. Group steel production total, in total, is 1.68 million tonnes, including Oman. And the sales has been 1.65 million tonnes.Overall, so if we look at the overall performance, it has been quite satisfactory. A couple of other points, which I want to also particularly highlight there, that this has happened because of 2 major initiatives, the 2 initiatives which have happened. One within the plant, in the sense that we have increased our operational efficiency quite substantially within the plant. And that has taken away all the impact of increased raw material cost, by and large. And of course, in the market...[Technical Difficulty]

[Naushad Akhter Ansari, Joint Managing Director]

Hello, operator?

[Operator]

Yes, sir?

[Naushad Akhter Ansari, Joint Managing Director]

There was some music that stopped it in between.

[Operator]

Yes, sir. I was just trying to identify that, sir.

[Naushad Akhter Ansari, Joint Managing Director]

So are we still connected? Do we continue? Or should we...

[Operator]

Please continue, sir. Please continue.

[Naushad Akhter Ansari, Joint Managing Director]

All right. Okay. So I was saying that this performance has been primarily because of 2 major reasons. One reason was within the plant that we improved our operating efficiency substantially, cut down our costs, et cetera, which took away most of the impact of the increasing cost of the raw material. And the other one was in the market, that we improved our service very substantially; the product mix, we improved substantially; and ensured that our ASR is maintained well. And that is how we have been able to manage our EBITDA numbers. So this is as far as -- in short, the steel performance for the quarter. I am also very happy to tell you that in the month of January, our current, our run rate quarter production has already reached more than 6 million tonnes. So that we are coming very close to our goals. And that's another good news that I wanted to share with you. When we talk in terms of Oman, Oman's third quarter performance is, in terms of production, it is 40.46 million tonnes of group steel has been made as against [ 54.2 ] million tonnes which was made in the third quarter of FY '18. And the EBITDA has, of course, not been as much as what we -- what was there in the earlier year. On a year-on-year basis, it has come down primarily because of the falling global prices. So Middle East did see a very substantial reduction in the realization. In India, we have more opportunity for playing with the product mix. In Oman, of course, we also do that by selling more specialized rounds and specialized billets, et cetera. However, the rebar prices are very important there, and that's what really determine what happens in that part. So the impact of the lower prices of rebars can be seen in the numbers. As far as Mozambique is concerned, in the Mozambique mines, we produced 0.5 -- 0.45 million tonnes, close to 150,000 per month basis. And in Australia, this was a time when we also took a lot of maintenance activities and produced approximately 86,000 tonnes of material in the quarter.Going forward, if you look at the steel scenario, you all must be seeing what's happening in the steel business. In the last year, overall, about 70 million more tonnes of steel was produced in the world. And out of which, more than 50 million tonnes actually came from China. So that is -- and since Chinese demand declined substantially, so that is what really led to very substantial price decrease in the world. That was -- the impact of that was seen everywhere. And India, also, we did see the impact coming out of that. The good point is that once the prices at which Chinese -- the Chinese have reached their level, there is really no margin for them anymore for reducing the prices any further. In earlier quarters, they were operating close to about $100 margin, and that margin is totally wiped out. So therefore, we believe that they already -- they have reached the bottom, and from now onwards, we can only see the improvement in the prices. So that, to my mind, is the good part which is there. In this particular quarter, we also see that there would be some headwinds that we now got because the continued impact which is there, the earlier orders as well as the orders we can bring, we have improved. There would be some headwinds in terms of the realization. However, we will continue to improve our cost. And on the back of the Angul performance, Angul ramp-up, we are sure that we can cut down our cost substantially and improve our performance. And most of this impact, we can actually mitigate. So overall, we totally expect that there is a healthy business possibility which is there for this quarter also. With this, I will conclude my opening remarks and request Mr. Sudhanshu Saraf to also add some words to give us a deeper understanding in the direction of our business. Sudhanshu?

[Sudhanshu Saraf, Chief Executive Officer of Steel Business]

Thank you, Ansari. Good afternoon, everyone. I'm very happy and excited about joining this team. I've been associated with this team since 2015 so -- as a management consultant. So neither the plants are new to me, nor the mines are new to me, nor the people are new to me, nor all the challenges are new to me. So I've been working with this team for long now, and I've just taken on the executive role. I see -- still see a lot of opportunity, and I'm working on improving operational efficiency in the plants. And I still see a lot of opportunity there as well as in the mines in Australia and Mozambique. The other area that I've taken on priority is to reduce cost further, aside from the share that we have covered good ground on reducing costs. So I'm taking that further on to reduce those costs further. The ongoing operation costs have come close to the riser plant, and we still see a lot of opportunity to reduce this cost further by about INR 2,000 per tonne. So that -- those are the kind of opportunities that we have. The other area which is probably -- may cause some disruption in the industry is customer satisfaction. So we have taken a huge drive on improving on that side of customer satisfaction. So I'm very excited to do great work on all these areas, and look forward to more office interactions with this team. Thank you.

[Nishant Baranwal, Head of Investor Relations]

Thank you, Sudhanshu. Thank you very much. So may I now request Mr. Bharat Rohra to give you his opening remarks on JPL and the Power business? Bharat?

[Bharat Rohra, Chief Executive Officer of Power Business]

Thank you, sir. And good afternoon, friends. The third quarter of the current financial year for JPL has had mixed fortunes for JPL. The generation has gone up to 2,600 million units as compared to 2,400 million units in the previous quarter. The turnover has gone up to INR 1,004 crores as against INR 911 crores in the previous quarter. The PLF has grown by 9%. From 32%, it has gone up to 35%. The NSR remains almost the same. It was 3.83 in the last quarter. It is 3.81 in the present quarter. However, the coal cost has played the mischief before us. It has gone up to 2.47 per unit as against 2.18 in the previous quarter. Due to this increase in the coal cost, the EBITDA is marginally lower at INR 273 crores as against INR 302 crores in the previous quarter.A comparison on a year-on-year basis means a slight drop in generation due to lower exchange sales, and the generation has decreased from 2,900 million units to 2,600 million units. And turnover decreased from INR 1,172 crores to INR 1,004 crores. However, the NSR has gone substantially up from 3.14 in the year-on-year versus previous quarter. It has gone up to 3.81 per KWh. But the increase in the coal cost has been more, and it has gone up from 2.15 to 2.47 in this quarter. Thereby, the EBITDA has gone down from INR 350 crores to INR 273 crores. The outlook for the fourth quarter is much better as JPL has received a 200-megawatt short-term PPA from the 15th of January to 13th April 2019 at a good price. This has become operational with effect from 15th January. And we are providing power to Telangana under this PPA. With EBITDA being serious, there is demand from various discounts for the period from February to June 2019, and we are L1 in another agenda from CSC. We have also been participating in a few other short-term tenders and expect to convert some of them into PPAs very shortly. Due to the government policy of power for all and also the forthcoming general elections, the fourth quarter of 2019 and the first 2 quarters of the next financial year are expected to give much better results for JPL. Availability of coal towards the end of the quarter has improved as HSCL has come out with option of a sizable quantity of coal and special power options, and JPL has also managed to book about 7.5 lakh metric tonnes in these options. The production reported by Coal India in this third quarter has also been about 30% higher at 156 million tonnes in Q3 as compared to 120 million tonnes in Q2. The long-term outlook for the power sector appears to be pretty good as the government has set up a high-level empowered committee to look into various issues being created by the power sector. The Empowered Committee headed by the Cabinet Secretariat himself has come out with a few progressive suggestions, which when approved by the Cabinet should help revive interest in the total power sector. The committee has also addressed the issue of payment of dues by various utilities. And it is likely that REC and PFC, which are now in the merger move, they shall go about a mechanism for the liquidation of the use from various utilities. EPS in medium term and long term, which were missing for a few years, are now being issued. And [ best of all, ] has come out with an inquiry for 500 megawatts for 5 years. Also, PFC Consulting plans to aggregate about 10,000 megawatts of power from stressed assets in the next few months. And most of the stressed assets, which have operational power plants, will soon be available to book capacities under this scheme. JPL is also eagerly looking forward to the sale and hope to book a good quantum under this scheme. Thank you, gentlemen. I'll hand over to our CFO.

[Deepak Sogani, Chief Financial Officer]

Good afternoon, everybody. I am pleased to present to you a very strong set of financial performance for this quarter. In this quarter, our revenue on a consolidated basis was INR 9,580 crores, which has shown a 37% growth on a Y-o-Y basis. Our standalone revenue stood at INR 6,745 crores, which was also higher by 58% on a Y-o-Y basis. Our EBITDA on a consolidated basis was INR 2,077 crores, which is 29% higher on a Y-o-Y basis. And our standalone EBITDA stood at INR 1,480 crores, which is 61% higher on a Y-o-Y basis. I'm also happy to report that on a blended basis, in the reported quarter, our NSR per term actually went up by almost INR 1,700. And we also -- obviously some -- we saw some additional costs there that is also coming in, in the current quarter. And we saw the cost impact of around INR 800 in the current quarter on account of iron. Iron ore and coking coal also impacted us by around INR 500. So net of all of that, we -- and we saw some efficiency gain coming in to the extent of around INR 500. So the total cost impact of INR 1,300 crores was muted to the extent of INR 500 on account of several efficiency inputs that came into our renewable plant. The net benefit that we saw was around INR 900, so our EBITDA per tonne went up by almost INR 1,000 in the reported quarter. I must also kind of take this opportunity to kind of give some color on how the EBITDA and the costs -- or the NSR and the costs are moving forward in the current quarter. Clearly, there has been a decline in the NSR in January and February. We are seeing decline of around INR 3,000 to INR 3,500 in the month of January, February versus December; and versus quarter 3, almost INR 3,700. So there is a significant decline that we are seeing in the NSR in the given quarter.However, the good news is that our EBITDA, as we are seeing, the cost has come down quite significantly in the first 2 months of -- what we've seen in January and what we're seeing in February. The cost is appearing to be lower by almost INR 3,000. And versus quarter 3, we are seeing the cost already coming down by INR 3,500, primarily on account of the fact that iron ore prices have come down very significantly, and the full benefit of the iron ore price reduction will be seen by us in the reported quarter. So this is our understanding of the production in the NSR but our company's improvement in the cost also, we are not seeing any significant reduction in our EBITDA happening in the current quarter. So hopefully, we will be able to see the current quarter also pretty much in line with the reported quarter from an EBITDA per term perspective. Obviously, some part of the current quarter is yet to be obviously executed, but that's our current understanding of the numbers. Let me move my commentary on the CapEx side. On the CapEx side, in the 9 months period, we had around INR 850 crores of consolidated CapEx. And in the last 3 months, we've seen CapEx of around INR 100 crores, INR 250 crores. This is absolutely in line with our annual guidance where we said that we will do a maximum of around INR 1,500 crores of CapEx in the current year. And on a going -- ongoing basis thereafter, we will see on a -- so we are absolutely in line with the CapEx guidance that we had given in the year. Now let me move my commentary to the debt side. In the reported quarter, as you are aware, on the debt reporting, we have been taking out of foreign currency impact, right? So we will do the same in the current quarter as well. On a net debt basis, at the end of quarter 3, our debt has now sit below INR 40,000 crores for this quarter. And constantly, we are working on deleveraging our business on multiple fronts. Our consolidated net debt at the end of quarter 3 stand at INR 39,197 crores, which was INR 40,236 crores at the end of last quarter. So we have seen our debt go down by INR 1,039 crores on an absolute basis. Obviously, in the last quarter, we have seen a foreign currency-led reduction in our grossly -- or in our gross reported debt by INR 1,475 crores. That impact has come down by INR 905 crores -- to INR 905 crores. Therefore, in the actual reported debt in the numbers that we have given to you, on account of foreign exchange reporting, there is a INR 570 crores component that is also shown as a reduction by virtue of the foreign exchange impact reducing from INR 1,475 crores to INR 904 crores. Therefore, on the reported number, the debt is INR 1,609 crores now. But on a -- without foreign exchange basis, the debt is down by INR 1,039 crores. So that's one commentary on this quarter, what the debt has come down. From the opening, our debt has come down by INR 3,235 crores. All right? So that's one important thing on the debt. I would also like to take this opportunity to give a quick commentary on the shareholder ledgers. I'm happy to state that from the peak borrowing in the personal, hence, the borrowing has come down by almost 15%. And we have sufficient security and liquidity to handle any adverse situation in the market. I think with that, I would like to complete my opening comments, and we look forward to questions from your side.

[Nishant Baranwal, Head of Investor Relations]

Before we take your questions, a small request, everybody. Please refrain from data questions. We always direct IR to answer those. Since we have the management here, let's stick to more strategic questions. With that, I will request the operator to open the line for questions. Thank you.

[Operator]

[Operator Instructions] The first question is from the line of Atul Tiwari from Citigroup.

[Atul Tiwari, Vice President and Analyst]

Sir, I have 2 questions. Sir, the first one is on your debt. It was slightly confusing. Can you tell how much was the consolidated net debt in rupee terms as of September end? And obviously, the December end number we have. And how much it fell by, in rupee terms?

[Deepak Sogani, Chief Financial Officer]

Okay. So on a net debt basis, as of 31st of December, our consolidated debt stands at INR 39,197 crores, right? As at the end of September, the same consolidated net debt figure was INR 40,236 crores. Therefore, we have seen a reduction in our consolidated debt by INR 1,039 crores in this quarter, right? This is -- let me -- again, I think there is a bit of confusion on account of the foreign exchange treatment. So let me clarify. Each quarter, because of foreign exchange volatility, the consolidated debt reporting on the actual number changes. As at the end of last quarter, due to foreign exchange impact of reporting the debt, which actually does not matter to us because the debt that we have taken are in international geographies where the debt is being serviced through same currency payments. So as at the end of last quarter, due to foreign currency fluctuations, our consolidated debt became higher by INR 1,475 crores. We eliminated that because that was not real. It was only the foreign exchange impact of reporting the debt. So without the foreign exchange impact, the debt last quarter was INR 40,236 crores. And at the end of this quarter, the foreign exchange impact became a little lesser. So the foreign exchange impact is actually INR 905 crores in the full year so far. And thus, in the reported figure, we have seen a further reduction in debt by INR 570 crores on account of the reduced foreign exchange impact as reflected at the end of December versus what was getting reflected as at the end of September. Again, let me, for clarity purposes, say that foreign exchange impact, we want to eliminate. And without the foreign exchange impact, the net debt has gone down by INR 1,039 crores in the reported quarter. Is that clear?

[Atul Tiwari, Vice President and Analyst]

Okay, sir. Yes, that's clear. And sir, my second question is on Angul DRI and the coal gasifier plant. So now that the blast furnace seems to have stabilized, going by the January run rate, so when are you guys planning to fire that? And what is the status on the coal supply for the gasifier?

[Naushad Akhter Ansari, Joint Managing Director]

Right. So we had already communicated earlier that once the blast furnace stabilizes to a certain level, then that's the time that we are going to start the DRI. And you are absolutely correct, that time has come now. In this month, it's still, by middle of the month, we are planning to start our coal gasification process. And subsequently, the DRIs would essentially start. So this month, it's definitely in the month of February that we are going to start, by middle of this month.

[Atul Tiwari, Vice President and Analyst]

Yes. And sir, what about the quality and the consistency of quality of coal for the gasifier, both the quantity and the quality side?

[Naushad Akhter Ansari, Joint Managing Director]

So we have obviously addressed that. I mean, as you are aware, we ran this process for quite some time earlier. And we garnered a very good experience, and we knew what is required from the plant. So we have utilized that experience, and we have obtained the coal based on the requirement. And already, we have started stockpiling that coal within the plant. And we have got the right kind of coal now. So we are very hopeful that we'll get started. And this will be something which will be continued, and this will be a very viable and sustainable process.

[Operator]

The next question is from the line of Rajesh Lachhani from HSBC.

[Rajesh V. Lachhani, Analyst]

Two questions from my side. Number one is, sir, we can clearly see that the blended realizations were much higher than -- how the rebar prices had fallen, and yet, the NSR has been much better. So I just wanted to understand what was the value-added product mix this quarter compared to last quarter? And how can we reconcile the increase in NSR?

[Deepak Sogani, Chief Financial Officer]

Okay. I think let me take a shorter take, and then we can have input from others here. What is happening, obviously, we don't share product mix in detail. But what is really happening is that as Angul is ramping up, we are making more of high-grade plates because the plate there produces high value-added plates. The NSRs on those plates are quite significantly higher than the NSRs realized by us from the plates that we sell from Raigarh. So that one shift, that is already happening, which is increasing our NSR. Second, in the rail RUBM structure business, there has been no reduction in NSR, actually, the NSRs have gone up because these are all profitable long-term businesses. So given the blend that we are seeing between these 2, our net realized NSR has actually improved. The other thing that has also gone up is the fact that we are focusing to improve our NSR through increased proportion of value-added steel. So each -- whatever steel we sell, we obviously do valuation in terms of hardening it, leading it and adding other materials, et cetera. So as a conscious strategy, our team has been focusing to improve that proportion as well. So as a blend of these 2 product mix changes and value addition improvement initiatives at our end, what we have seen is an improvement in our NSR per term of around 1,700 now as we've reported to you.

[Rajesh V. Lachhani, Analyst]

Right. Sir, would it be possible for you to give the value-added product mix this quarter and next quarter, not the entire product split, but just the value-added product mix?

[Deepak Sogani, Chief Financial Officer]

I think we will work this out, I was also thinking. But right now, on this call, we are not -- we will arrange to send it to you separately, okay?

[Rajesh V. Lachhani, Analyst]

Sure, sir. And sir, the second question was on your full year guidance for FY '19. So clearly, the first 9 months, the sales have been around 3.7 million tonnes, and the production is closer to that. So what could we think about the overall volumes for FY '19 and going forward in FY '20?

[Naushad Akhter Ansari, Joint Managing Director]

So if you look at our Indian operations, we expect that in this particular quarter, we should be doing something closer to about 1.5 million or so, so -- roughly. So you add these 2, and that's how we really come to this number. And in this particular year, it's close to about 5.2, around that, 5.2, 5.3, whatever. That is the kind of number which will come. In the coming year, in the next financial year, our target is to have a minimum of 6.5 in India and plus, of course, somewhere close to about 2.3 million, 2.4 million tonnes in Oman. That's, going forward, that's the kind of [indiscernible].

[Operator]

[Operator Instructions] The next question is from the line of [ Anjuman Adri ] from [ P&G Invest ].

[Unknown Analyst]

My question is on the demand side...

[Operator]

I'm sorry to interrupt [ Mr. Adri ], but may we please request you to speak a bit loud, your voice is faint.

[Unknown Analyst]

My question is regarding the demand side. Are we seeing any slowdown in the common base demand and on the retail side? Because we have seen few companies having good production numbers, but they've missed out on the sales. Is there any weakness in the channel?

[Naushad Akhter Ansari, Joint Managing Director]

So as I had also mentioned in the opening remarks, quarter 3 certainly was a challenging quarter in terms of demand issues. There were certain sentiments primarily because the prices generally were coming down. And people were just waiting and hoping that the prices can come further down, and then they can place order. Also, there was an issue related to liquidity. And these 2 things combined together primarily gave an impression that demand is coming down. The fact here is that it starts at demand. There is no structural change. There is no real reason for the demand coming down within India. The GDP growth still remains fairly strong, and the steel is certainly following it. So therefore, I really don't expect demand per se to come down. The prices would, of course, be guided, in large, by what's really happening in the external world. And as I had also mentioned, that because I think that the Chinese have already bottomed out at their price, the prices are unlikely to go down any further. So both on discount, there's demand within the country should improve. And also, the international prices should not come down any further. We are very hopeful that this quarter should be quite reasonable from that point of view. There would be obviously -- I mean, we are still transiting -- there is the debt changes going on. As market has still not picked up completely and so on, you will find that the MSRs, the prices, will be under pressure as was already mentioned by Mr. Sogani in his opening remarks, with that issue, once again, in this quarter. But the good thing for us is that we have a peak room potential, which is available in terms of the improvement. So our own performance, we'll be able to get -- we should not be -- have any negative impact at all.

[Operator]

The next question is from the line of Ritesh Shah from Investec.

[Ritesh Shah, Analyst]

Sir, every quarter, we have actually done better than the prior quarter. However, if I look at our full year guidance, we are very short both on Power as well as Steel. Sir, how would you reflect on this? And secondly, taking -- in taking into next year's volume guidance, just a follow-up question over here. Do we take into account DRI, which you indicated will start in 15 days? And secondly, on Oman, I think you had indicated earlier of incremental gas allocation. Sir, if you can just couple these 2 questions into one, it would be great.

[Naushad Akhter Ansari, Joint Managing Director]

Right. So you talked about overall performance in Jindal Steel. If you look at overall performance, it has not been bad at all. I think we are definitely happy with the kind of performance which is there. Angul ramp-up, if we look at it primarily, one of the driving factors for us is the Angul ramp-up. And that ramp-up is happening quite okay. Look, as I also told you that in the month of January, we have already touched this -- has this rate of -- a ramp rate of 6 million tonnes. 6 million tonnes run rate is what -- and the next year, we are talking about 6.5. So we are really ramping as per the kind of numbers that we have been talking about. Power, of course, power has been an issue in terms of coal availability and so on. And that issue, we feel, has not bottomed out. We are hoping and we are participating in all auctions and also looking for all the linkages, et cetera, but we have still not solved that issue. We hope -- we are only expecting that, going forward, Coal India will be able to produce some coal ore, then we'll be able to get some more coal out of that. So that will certainly help. As far as Oman is concerned, if you look at Oman, obviously we have got additional gas in Oman. And because of that additional gas and because of the DRI that we have increased the capacity of DRI and also that we have put a bit of additions in the facility in Oman so that capacity has gone up to 2.4 million tonnes. In terms of production in Oman, we are doing much better than what we were doing earlier. We will continue to ramp it up. As far as rebar prices, which is an important product which we have in Oman, that certainly is subject to the current market scenario. And what I also wanted to communicate to you is that there also, we have seen now that the prices are coming up. So therefore, going forward, there is quite a bit of hopeful sight as far as Oman is concerned, that our margins in Oman will certainly improve in this quarter.

[Ritesh Shah, Analyst]

Sir, I'll just take this a bit deeper. Sir, specifically, I wanted your reflections on, say, if one looks at, say, Steel. You indicated like we can do 5.1 million tonnes for the full year. And this is again significantly lower than the 7 million tonne guidance that we are given at the start of the year. Likewise, if one looks at Power also, our guidance was 1,900 megawatts, yields us 52% of it. Power, sir, we can understand because of external issues. The coal PPA is not coming through. But sir, specifically on Steel, this gap is still wide. So if you can, sir, provide some comfort on next year's guidance of 8.9 million tonnes. So if you can explain why this gap and something of that sort, not come to recourse. Our guidance looks a bit more optimistic. It's just a bit difficult. If you can basically provide some more color over here, it would be quite useful.

[Deepak Sogani, Chief Financial Officer]

No, I understand that comment. Number one, as you said, 5.10, same price, 1 year, same, minimum price was 5.2, which is actually more than that. That is 1 correction we could provide. The other here is that I already told you this in the month of January, we already reached a level of 6 million tonnes in India. And in Oman, we are at the 2 million tonnes there. So practically, we already are at the 8 million run rate, which is already there. So therefore, going forward in the next year, there should not be any doubt at all in achieving the kind of numbers we give. 6.5 in India is certainly feasible with the kind of ramp-up that is happening in Angul. And in Oman, certainly, it is possible because we're already at almost 2 million tonnes stage and going to 2.4 million there is also -- with their billet facility which is already operational, certainly it's going to happen. So now your question is why we have not been able to achieve the kind of number which you are talking about in this particular year. Obviously, it is a ramp-up thing which is happening in Angul. We have been saying again and again that we want to make sure that this ramp-up is in a very cautious manner. We are talking about last one is making sure that the entire plant remains in a stable manner and so on. That might have taken a little longer than what might have -- that it should have taken. So but then, going forward, all I can tell you is that we are already at that range, that 8, and there should not be any difficulty at all in achieving the number, which we are talking about.

[Ritesh Shah, Analyst]

Perfect. Sir, you had indicated...

[Operator]

Sorry to interrupt, Mr. Shah, but may we please request you to return to the queue for your follow-up questions as we have several participants in the queue waiting. Mr. Shah, thank you. The next question is from the line of Pinakin Parekh from JPMorgan.

[Pinakin M. Parekh, Associate]

Sir, 2 questions. The first is related to the debt part. Sir, can you give us the reported net debt, including all the sort of foreign currency fluctuations which are there? I mean, I understand that you're taking it off when there is a dollar payment. So what will be the debt if we have to include the YTD currency movement that is in there? And just trying to understand the INR 1,000 crores debt reduction on a Q-on-Q basis? Because the consolidated EBITDA was roughly INR 2,000 crores and if you remove the interest payment and taxes, it will be less then. So have you seen any material working capital reduction or anything?

[Deepak Sogani, Chief Financial Officer]

Pinakin, let me first address your first question as to what is the reported net debt figure. INR 905 crores is the FX plus INR 39,197 crores. So the reported net debt figure will be INR 40,102 crores.

[Pinakin M. Parekh, Associate]

But sir, this would be only the FC, foreign currency, which is there for this quarter, because last quarter also, there was a similar INR 1,476 crores foreign currency.

[Deepak Sogani, Chief Financial Officer]

That is a balance sheet figure, not of the P&L figures. So at the end of last quarter, the total currency impact was INR 1,475 crores. So that much was the increment in the net debt reporting. And at the end of December, the same figure has come down. And at the balance sheet level, it is INR 905 crores. And therefore, as I said in my earlier comments, in the actual reduction as you can see on a quarter-on-quarter basis, because of this foreign currency impact also coming down, the additional INR 570 crores reduction is seen in the current quarter. From a data point of view, Pinakin, first, let's say, are you clear about the data then? Or we can share this data separately as well. And the next question that you asked is the way the working capital impact or where the cash has been utilized, I think. That's the question that you're dealing with, right?

[Pinakin M. Parekh, Associate]

Yes, sir.

[Deepak Sogani, Chief Financial Officer]

Okay. So let me just say that on a high-level basis, we had an EBITDA of around INR 2,000 crores, good, consolidated. We have interest of around INR 1,000 crores that is stable. So around INR 1,000 crores remains. On a cash basis, we had cash in hand. As at the end of last quarter, we had a figure with -- our cash at the end of last quarter was INR 947 crores. And at the end of this quarter, it is INR 507 crores. So the cash on hand amongst all of our global businesses and Indian businesses and Power all put together, we were able to kind of release some cash from the balance sheet itself. Pure cash assets came down by INR 440 crores, so we have INR 1,481 crores available with us. With bank payments of around INR 1,000 crores deleveraging over and above, part of it is even above our scheduled repayment. So in each quarter, we are trying to see if we can make some more payment over and above our scheduled payment whenever possible. Then we had capital expenses of around 150-odd crores. And actually, our working capital number went up by around INR 300 crores to INR 350 crores because obviously, Angul is ramping up now, and we have increased our raw materials in the balance sheet to support the ramp-up and accelerate it. And also the CGP and the DRI combination will start shortly as Ansari already mentioned. So we have been preparing, again, to build out a bit of inventory for that particular start-up as well. Is that clear, Pinakin?

[Pinakin M. Parekh, Associate]

Sure, sir. And lastly, any update on Oman, this investment of bringing investors? And given how the market is, so whatever net debt guidance we have now, how are we looking at the Oman part of that guidance?

[Deepak Sogani, Chief Financial Officer]

So let's say, this year, we submitted -- give a total picture related to Oman. We have said that we will want to move to reduce around INR 12,000 crores of leverage in 2 years, FY '19 and FY '20 put together, correct? And we were saying that operationally, we should be able to do INR 4,500 crores and balance will be nonoperational this year. Because this year, they were targeting around INR 5,000 crores and next year, around INR 7,000 crores to build out the INR 12,000 crores deleveraging structure, okay? That is clear. I think this is what we've been saying on all our quarterly earnings as we're managing very actively to deleverage ourselves. And similar to last quarter, we were at INR 3,235 crores reduction, and we are hopeful that we would be able to complete on an operational basis, INR 4,000 crores plus of deleverage happening, right? Other than the operational deleveraging, we are working on key initiatives to raise some equity for the equity in Oman. The targeted amount is around $300 million. If we were able to raise that and if we are able to -- I think the project has been going on for the last 15 months. It's a mature project. The delivery date of that project is around March, so hopefully, we should be able to conclude that transaction in March, by and large, we are at an advanced stage of the transaction. When that transaction happens, obviously, part of it will get used for deleveraging as well. In addition to that, we're also looking to kind of restructure our Australian debt, which, again, can add on to the deleveraging part. So I think we're taking a few more initiatives to see if we can reach the INR 5,000 crores figure this year itself. If we reach the INR 5,000 crores figures this year, next year, we will obviously expect additional cash flow from the higher volume as we evolve. And Ansari just explained that we are already at a very high run rate, and next year, we should be able to see better volumes both from Oman also. The Oman plant will also increase its capacity from 2 to 2.4. And in India also, we should be able to certainly see an additional 1.5 million or maybe thereabout volume. So the additional cash flow that will come from the Indian higher volume than Oman higher volumes, hopefully, we would be able to touch operationally a figure of maybe INR 5,000 crores plus next year. Still, we will return short, and we will have to get that through nonoperational restructuring or deleveraging initiatives. But we are obviously working on all those initiatives as we have discussed.

[Operator]

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

[Bhavin Chheda]

Sir, good set of numbers in a challenging environment. Sir, 2 questions, mainly first, you said that your current steel prices are 2,500 to 3,000 down in Jan-Feb versus Q3 but your cost is also coming down by a similar number. So are you expecting a similar EBITDA number in the standalone operations as it is in Q3? What is that? A continuation of that question, you said the Angul costs are now similar to Raigarh that it may come down by INR 2,000. So when do you expect this further reduction of Angul costs by INR 2,000?

[Deepak Sogani, Chief Financial Officer]

So let me take that question, Bhavin. I think, firstly, I think all of us are aware that the iron ore prices have come down quite significantly, okay, over the last quarter, in line with the reduction in the NSRs of the business. Typically, raw material costs also will go down to that effect. So in quarter 3, we were able to see some benefit of the reduction in the iron ore prices. And also in the coking coal prices, some marginal improvement was there in last quarter. But in this quarter, we have seen significant impact of that coming in because right from the beginning, the iron ore prices are low. Last quarter, we had a blend of old prices and new prices. This quarter, we are starting fresh with the low prices on the iron ore side. So based on that, our basic computation is that iron ore prices and coking coal and some other input costs are already kind of helping us and helping us to -- in the numbers that we are seeing right now at the end of Jan and the current month in Feb, already we are witnessing about INR 3,000 reduction in our steel cost, which is a function of many things, right? So let me say what all contributes to the reduction, right? That's your second question. Clearly, Angul costs used to be higher than Raigarh, in part because it was operating at a lower volume, right? We have started seeing our Angul cost becoming comparable with the Raigarh cost. It's already -- there is some benefit coming in on that count, which is improving our total cost of producing the steel. That's one. Second, as Sudhanshu mentioned, we are working on several operational efficiency initiatives, which deal with improving the blast furnace cost component, which deals with improving the mill fundamentals, et cetera, et cetera. So based from the multiple initiatives that we are seeing, we will obviously see some improvement coming in from there. So third component is Angul. Once Angul is fully mature and ramped up, today, it is competing with Raigarh in terms of cost and balancing. We would want to see that about INR 2,000 below Raigarh. And Angul mix will be higher than Raigarh in the next year, for sure. Raigarh will do around 260, 270, 280, 290, in that ballpark. But Angul already is crossing that level. And in this quarter, it should cross that level. And next year, certainly, it will operate at about 3 lakh, on an average of 3 lakh, in that zone. So with that higher list coming in and lower cost of Angul, we should see some more reduction happening in the future. But I guess, as a matter of fact, the situation is clear that there is some reduction in the NSR as we spoke. We are constantly working to improve our 2-riser. Product mix will improve due to more in Angul and more value-added. Some of the market-led reduction in the NSRs will get muted for us. But at the same time, we are clearly seeing almost INR 3,000 cost reduction as we sit today. Obviously, I can't talk for what will happen in 7th March. But based on what we understand today, based on what we understand today on both NSR and on the cost side, I'm sure we will be able to kind of keep our EBITDAs in 4 digits for 5 years, for sure, at 10,000 above but maybe there could possibly a marginal reduction maybe INR 500, even INR 700. I think based on today's understanding, that is what I can say for the current quarter.

[Bhavin Chheda]

Sure. The second one, sir, I think if you can update us on the Australian coal operations because that has not performed in line with our expectations for the last 12 to 18 months. So what has changed? And I think in this quarter, you had a shutdown also. So if you can give us some kind of a volume run rate in coal and some kind of fixed cost. What are the fixed costs there and, obviously, in operations? And when would that break even or start contributing to the overall numbers?

[Naushad Akhter Ansari, Joint Managing Director]

Great question. That is one area which is tremendous focus from a management team perspective. Several things have happened in the last 1 year. One, we have started making widgets almost every month. We have had huge operational improvement plant there, with which I see -- and Sudhanshu. I see that in the next 2 quarters, we should be able to clock 70,000 tonnes a month pretty easily, which we are currently struggling around 30,000, 35,000 tonnes a month. I mean, to make you understand, some of the things and the swing on some of the areas. For example, the reliability of our bench, which take the coal from 15 kilometers, 16 kilometers inside the mine to the surface, the downtime used to be about 45% which has been brought close to single digits. So currently, we are at about 12%. So this is one of the examples that I'm giving in that direction. So 70,000 is what we are actually seeing in the next 2 quarters, and which will -- they will further ramp it up to 100,000. And our plans and everything is absolutely in place, and we have very high confidence on that. There are a couple of other levers that we have on the Australia front. One is the land that we have over there, which is a very prime land, ocean view, golf course next to it. So I mean, we are in discussions with people to -- how to unlock value on that front. The third area that we have is the restructuring that we are actually doing on the debt side. So those are the key levers that I just wanted to share.

[Operator]

The next question is from the line of Sanjay Jain from Motilal Oswal Securities.

[Sanjay Jain]

In case of Oman, could you give some color on how the cost of production is moving there? Because I suppose raw -- pellet price has come down, and gas price is also linked to the steel prices to some extent. So how is that equation moving there?

[Deepak Sogani, Chief Financial Officer]

So you see the -- Oman, obviously, there are 2 major costs, which are there. One is the pellet, and the other is gas. Now we have already gas availability at a reasonable price, so that part is already taken care of. So the real variable is the pellet price. And these pellets are the DR-grade pellets, which are there in the market. There are, obviously, a number of players who are supplying this. So it is like a portion of availability of those pellets in the market and the price economy. If you look at the entire last year's movement of index, so that, last year, the movement was somewhere between mid-60s. It was between $60 to $70, the kind of iron ore index was there in the last year, excepting at some part, later part, it has gone up a little bit on the back of this news of [ Walles ] issue, which has [ in there, been wind down ]. I read that in the newspaper that they have some issue in there, volume-wise, and then the prices have gone up. So such things can happen in this world of pellets. One is one issue, and there would be some sentiments attached to it and then there would be some changes. But then it just gets very quickly corrected based on the supply-demand scenario. So Oman cost per se is coming back to -- there are 2 parts here. I think one is that because they are improving their performance on a regular basis and they're increasing their productivity, so their overall fixed cost is coming down. And at the same time, they are working very effectively on distribution cost. So that part is there. Based on the pellet prices, which will have change in the market, which, in a way, also has a direct impact on what's happening in the rebar prices, if you look at the kind of spread which is there, obviously, the spread does change. But there is a relationship which is there. So if the pellet prices change, with a certain lag, the rebar prices also and lastly, billet prices also, they also tend to change. So therefore, rather than talking about cost per se, I would be more talking about the kind of margins which are there, and that is what we think is that the margins which will be the current margins which are there. They should certainly be better than the quarter 3 margins.

[Sanjay Jain]

Got it. Can you share January production for the India business, absolute amount?

[Deepak Sogani, Chief Financial Officer]

Yes. But this is for the -- this discussion is for the last quarter, so we really don't want to get into that detail, excepting just communicating to you that in the month of January, we have already gone over a rate, a run rate of 6 billion in India, and that's the news which I really wanted to share with you.

[Operator]

The next question is from the line of Meera Midha from Edelweiss.

[Meera Midha, Research Analyst]

I have 2 questions. So you mentioned that both the DRI plant and the CGP will be starting later this month. What will be the volume implications and the cost implications for the same?

[Deepak Sogani, Chief Financial Officer]

So you see this DRI plant, we are going to start. And obviously, the intention is to keep pushing the production based on that. Initially, we will be starting with a smaller number and keep pushing it up. So as far as volume is concerned, we have already told you that we are talking about 1.5 million tonnes in this quarter. And that is how -- this also is an important element of that, that will go up. As regards to cost, this cost may be marginally higher than the blast furnace cost. But the important thing is that the product is still going to give us substantial margin. And therefore, it makes complete sense to start this and make money out of it. So this is, in any case, I mean, support in terms of volume as well as volume, obviously, which is going to go up. And it will contribute to this 1.5 million tonnes, what we are talking about in this quarter. And the cost, even though marginally higher than blast furnace, will still be good enough to give us a good return.

[Meera Midha, Research Analyst]

All right. And so my second question is still in terms of pellet source. What was your realization? And what's your strategy with respect to pellet sales moving on?

[Naushad Akhter Ansari, Joint Managing Director]

So okay. We -- as you are aware, that our numbers are all inclusive there. So we are not talking about separate numbers of pellet. But the important thing is as our production increases in India, we are utilizing more and more pellets. And only the remaining pellets are going to be sold-out. So that's the way that it's going to be. But our sales, external sales will be, I would imagine, less than 50%. Most of it, we'll be utilizing our -- in-house [ summary ].

[Operator]

The next question is from the line of [ Modit Kirya ] from [ Atwood Capital ].

[Unknown Analyst]

So we did some guidance on the iron ore prices. What are the expectations? So like, close to 66 mmbtu of iron ore capital mines will kind of expire by 2020. And the Brazilian economy has also said on 13th Jan that it will kind of reduce its production of iron ore by 10%. So brokerage houses are saying that, like the iron ore price in the international market will go up by $5 to $10. We wanted to understand what will be the effect on the company's EBITDA margins once the iron ore prices goes up.

[Naushad Akhter Ansari, Joint Managing Director]

So I think we need to understand this very well. If you look at -- in a way, the iron ore prices within the country and the international iron ore prices, often there is a major disconnect. So last year, for example, when the international iron ore index price was between -- in mid-60s or so, in India, the iron ore prices went up very, very sharply as you might have seen. And then of course, it has also started coming down. So even though there could be an impact, let's say, of the iron ore prices externally going up a little bit, but in India, we do believe that it is actually not going to go up. It won't go up at all. It is actually going to come down because they had already taken these numbers to very high level, which was not a sustainable number. So that's number one. Number two is you're absolutely right that by 2020, the number of mines which are currently commercially being operated, they would no longer be with those owners. And the discussion has already taken place along with the government. They are very actively now looking at -- of finding solutions, maybe auctioning it to the steel plants or whatever other kind of solutions. But those solutions are going to come very soon, certainly much, much before the expiry of that lease period. And so therefore, it gives us a lot of comfort that there would not be any major hassle in to getting the iron ore as required.

[Operator]

We will take the last question from the line of Pallav Agarwal from Antique Stockbroking.

[Pallav Agarwal, Research Analyst]

I had a question on your other comprehensive income, if any, and read the most to accounts. So there has been an increase of some INR 4,200 crores on account of an overseas subsidiary. So which subsidiary is this exactly? And will this increase our network on a consolidated level?

[Naushad Akhter Ansari, Joint Managing Director]

Yes, I think that is primarily on account of the business in Oman. It was set up 7 years back. And they've actually done a lot of valuation work and really increased the capacity. So in the books, Oman business was valued at around -- somewhere around $0.8 billion, which is quite less compared to the market value of $2.4 billion integrated steel plant in that region. And based on review by the valuers, the carrying cost of the Oman business has gone up quite significantly. And therefore, what you're seeing there is the revaluation of the Oman business.

[Pallav Agarwal, Research Analyst]

Okay. So this will reflect on our FY '19 network result?

[Naushad Akhter Ansari, Joint Managing Director]

That is correct.

[Pallav Agarwal, Research Analyst]

So will our depreciation cost also increase in next quarter onwards?

[Deepak Sogani, Chief Financial Officer]

Yes. It will starting from next quarter onwards, yes. On cash expense anyway.

[Operator]

Thank you very much. Ladies and gentlemen, that was the last question. I now hand the conference over to the management team for closing remarks. Over to you.

[Nishant Baranwal, Head of Investor Relations]

So it was -- as usual, always a pleasure to speak to you guys. And once again, what we want to communicate is that despite the difficult situation, the company has done quite well. The results have been satisfactory. And we have a very strong management team, and they're very committed to [indiscernible] which we have, so we spend a lot of time and discuss that. And therefore, together, we are very, very certain that we will continue giving good results in the coming quarter and coming years. So thank you very much.

[Naushad Akhter Ansari, Joint Managing Director]

Thank you.

[Operator]

Thank you very much.

[Naushad Akhter Ansari, Joint Managing Director]

Thank you.

[Operator]

Ladies and gentlemen, on behalf of Prabhudas Lilladher, that concludes today's conference call. Thank you all for joining us, and you may now disconnect your lines.