Jindal Steel And Power Ltd

NSE:JINDALSTEL

Earnings Call Transcript 2020-Q3

[Operator]

Ladies and gentlemen, good day, and welcome to the Jindal Steel & Power Limited Q3 FY '20 Earnings Conference Call hosted by Kotak Securities Limited. [Operator Instructions] Please note that this conference is being recorded.I now hand the conference over to Mr. Sumangal Nevatia from Kotak Securities Limited. Thank you, and over to you, sir.

[Sumangal Nevatia, Analyst]

Yes. Thanks, Nirav. Good afternoon, ladies and gentlemen. Thanks for dialing in for JSPL's 3Q FY '20 Earnings Conference Call. We have with us the management of JSPL to discuss the results. I will hand over the call now to Nishant Baranwal, Head, Investor Relations at JSPL, to take the call forward. Over to you, Nishant.

[Nishant Baranwal, Head of Investor Relations]

Thank you, Sumangal. Good day, everyone. We welcome you all to JSPL's Third Quarter Financial Results Conference Call. Today, we have with us our MD, Mr. V R Sharma. We also have with us Mr. Bharat Rohra, MD, JPL; and our CFO, Mr. Deepak Sogani.Without wasting much time, I will hand it over to Mr. V R Sharma to start the conference. Sir?

[Vidya Rattan Sharma, MD & Additional Executive Director]

Hello. Good afternoon. I'm V R Sharma, Managing Director of JSPL.Last quarter, that is Q3, had been very good for JSPL, and we have done our highest production as well as our highest sales. Our consolidated turnover is INR 9,300 crores. You must have seen the results. Standalone JS Steel, Steel Division has done INR 6,640 crores. And the sales were at a level of 2.24 million tonnes, again, which is our highest in the quarter. We took the target in the business plan, annual business plan for the year 2019 to 2020. And this financial year, our plan was 6.5 million tonnes of steel production from India and 1.8 million tonnes steel production from Oman. And I'm confident that we'll surpass this figure, and we'll reach to more than 8.3 million tonnes of the production in this financial year.EBITDA level is good if you compare with the Q2. So there is a growth of about 1% despite of pressures from the selling pressure as well as overall price pressure in the international scenario. From Q3 of 2019 versus Q3 of 2020, the EBITDA level is down by 1%, and that is at the level of now INR 8,415 per tonne. But fortunately, in the end of December 2019 and the beginning of 2020, the prices have moved up and the net impact in January as against of November 30 is coming around INR 2,500 per tonne. We are aiming that in the Q4, we'll be crossing INR 10,000 per tonne our EBITDA level, and we'll also be crossing a turnover of about INR 10,000 crores in this Q4.So this is what the company has done. So company is doing extremely well. And we are also pleased to inform you that we have restarted our coal gasification and DRI plant. And this will give an additional quantity in the month of February and March, not in January because, January, we have taken some capital shutdown of our blast furnace. So January, we are aiming a similar kind of production level. But February, we should be at a level of 100,000 tonnes each steel production, and also in March. So this is what the company is doing. So we'll be doing 6.5 million tonne to 6.7 million tonne in a very easy manner. And similarly, from Oman, we'll be doing more than 500,000 tonnes, which was original plan.So EBITDA to -- if you see the EBITDA versus the sales turnover, we are at a level of about 20% now, and the ever highest was 23% in Q2, but after that, the prices came down. And now we are at a level of 20%. But we feel that in Q4, we'll be again at about 21% plus as far as the turnover-to-EBITDA ratio. And company is doing very well, so we are hopeful that we'll be in a position to steer it in a better tomorrow.So thank you from my side.

[Nishant Baranwal, Head of Investor Relations]

Now I request Mr. Bharat Rohra, MD, JPL, for his commentary on the power industry.

[Bharat Rohra, MD & CEO of Power Business]

Good morning, participants. The third quarter of the current financial year for Jindal Power has seen a marginally better performance compared to the previous quarter and the third quarter of last year. Comparison with the previous quarter shows the EBITDA margins have marginally increased to 32% compared to 31% in the last quarter and up from 27% in the last year third quarter.The effect of the monsoons continue to hamper the coal availability, otherwise, the performance would have been much better. JPL made alternate arrangements for coal from other sources to meet its obligations of power under the PPAs. Based on these arrangements, we have managed to maintain all the supplies to Tamil Nadu, Kerala and to Chhattisgarh with a generation of 1,900 million units. The comparison of EBITDA on a year-on-year basis has increased by 2% from INR 253 crores to INR 257 crores and on a Q-on-Q basis by 13% from INR 230 crores to INR 257 crores, primarily due to lower coal cost and better NSR.The stress in the power sector continues and has been aggregated -- aggravated in the second and third quarter by the coal shortage. However, the government's measures to give relief to the power sector has started showing some relief to the sector. Payments from DISCOMs have been streamlined, and now all [indiscernible] are paying JPL from the LCs that we made available as a security mechanism.As regards the future, the PPA pilot scheme was coordinated by NHPC, but was canceled, and the government has directed PTC to carry out the sale. The bids for the sale are to be submitted by the 24th of January and the reverse bidding expected on the 31st. JPL is planning to bid for a sizable quantity in this bid process.Regarding coal availability, the government has announced auction of coal mines for commercial use in any industry. The first round of bidding is expected within the current quarter. JPL plans to participate in these auctions for a mine that may be strategically located for JPL. The government has also announced linkage auctions for operating power plants who do not have PPAs and do not have FSAs. This will ensure a much better availability of coal for JPL and hence a much better PLF for the company.The current debt in JPL stands at INR 6,600 crores, down from INR 6,800 crores with about INR 200 crores repayments having been done in the current quarter. JPL is also in the process of repayment of debentures of INR 330 crores in 6 installments, of which 3 have already been repaid. All this is proposed to be done without any additional borrowings.It is pertinent to mention that on the directions of the Appellate Tribunal, TANGEDCO has paid all the 9 installments towards change in law dues payable to JPL. That takes care of 50% of the claim processed by CERC. We are taking up with the Appellate, release of the balance 50% of our change in law claims.For the current quarter, JPL has managed to buy over 7 lakh metric tonnes of coal from auctions at a low price, which will ensure a much better performance for JPL in the fourth quarter.With these comments, I would like to hand over the -- to our CFO.

[Deepak Sogani, Chief Financial Officer]

Good afternoon, everybody. We're very happy to report the highest-ever quarterly sales from India of 1.67 million tonnes in the reported quarter that is Q3, which is 31% Y-o-Y growth. And on a 9-month to 9-month period, we've seen 20% growth, so significant sales growth in line with what we have been saying that as Angul ramps up, we will see volumetric expansion in the Indian sales. So the theme or the business direction seems to be absolutely intact.Happy to report that Angul is ramping up very well. The CGP DRI section started in Jan, and we're likely to exit Angul somewhere between 3.75 lakh tonnes per month to 4 lakh tonnes per month. And Raigarh is doing steadily between 2.75 lakh tonnes to 3 lakh tonnes per month. So ballpark at the minimum range of 3.75 and 2.75, we should be able to kind of demonstrate an exit run rate in the month of March at 7.8 million tonne, which is significantly higher than the 6.5 million tonne or that we are likely to do in the current year. While we are exiting at 7.8 million tonne, we are broadly guiding for 7.5 million tonne of steel production in the next year from India. And obviously, the management focus, given the exit rate, et cetera, is to achieve significantly better numbers but to ensure that we guide at a level where we are absolutely comfortable. We're guiding The Street to 7.5 million tonne for the next year.In the current year, as our MD has highlighted, we are likely to touch the target of 6.5 million tonne, given the fact that Angul is now post CGP DRI, producing well.So that ends my commentary on the volume. Now my commentary on the EBITDA.We have reported INR 1,820 crore of consolidated profit or EBITDA in the reported quarter, Q3, which is Q-o-Q growth of 11%. On stand-alone, we've shown increase -- we have shown EBITDA of INR 1,352 crore, which is a Q-o-Q growth of 8%. And it is important to note that this quarter, obviously, was a relatively weaker quarter to begin with because the prices had dipped quite significantly. We saw the NSRs go down by almost INR 3,500 in the current quarter, although from December onwards, the prices have started picking up. And we can now say that in the month of -- so December onwards, prices have started picking up. And in January, the prices are even better. So broadly, as we speak, relative to the NSRs we've realized in Q3, we are, right now, seeing prices better by almost INR 2,000. So I think that is looking to be intact, and the EBITDAs, obviously, therefore, will increase in the current quarter.I must also say that while the NSRs dipped by INR 3,500, we saw the cost of steel, due to raw material and efficiency factors, reduce by INR 2,500. So to a very large extent, the cost of steel reduction compensated for the reduction in the NSR. The cost of steel reduction of INR 2,500 was largely driven by raw material cost reduction of around INR 2,100. But I must say that the management initiatives to improve the cost of Angul, and as Angul is scaling up and other initiatives being taken by the management to drive Angul to become the lowest cost producer in the country, which it already is, to take it even further. I think those have delivered about INR 400 -- INR 400 crores -- INR 400 kind of per tonne kind of a benefit. So I think that's the larger story on the commentary side from the stand-alone EBITDA. Second commentary on the EBITDA side is Oman. Oman, obviously, was a bit weaker in Q2. In Q2, it did an EBITDA of $16 million. And in Q3, we have reported EBITDA of $33 million, which is now better. And in Q4, as we speak, the rebar prices have bounced to a level, which is about $50 higher than the realization that we have bought in Q3. And therefore, we are looking to a much better quarter 4 EBITDA from Oman. So Oman seems to be back on track. And as you may have noted from my commentary so far that despite reduction of the EBITDA per tonne, we have been able to witness an increase in our EBITDA on an absolute basis due to expansion in our volume, which obviously has been our main theme.In addition to that, I would like to draw your attention to the management efforts being put in the international geographies, which have started yielding good results. In Australia, we used to have a cash burn of almost $4 million to $5 million per month. For the time being, we've put both the mines in care and maintenance. We've brought the burn rate down to almost $2 million per month. In addition to that, we are almost at the last leg of the mining approval for Russell Vale, and we are hopeful that we will be able to get that mining approval by the end of March. So next year, we should be able to find almost 1 million tonne plus from the Australian mines. Also our Australian team has been strengthened quite significantly. We have a very seasoned and experienced Chief Executive Officer, and a seasoned Chief Financial Officer also locally there. And therefore, both from a management point of view, from an operational point of view, approval point of view, we are likely to see significant improvements in the Australian business.Also happy to report that we have been able to file for the restructuring of the Australian debt in the Australian courts on the 5th of December. And hopefully, by the end of February, we should be able to kind of get to the next level of restructured debt in Australia. I cannot share more details about the restructuring at this stage, given the fact that the matter is sub judice, and the creditors [indiscernible]. But we are quite hopeful, given the fact that we've already built a fair amount of alignment with the lenders.Also on the Mozambique business, the management focus has improved, as we have reported, that the Mozambique business, the run rate of ROM production has -- is likely to go up. Right now, it's at about 3 million tonnes per annum. It will go up to almost 5 million tonne per annum. And the benefit of that is that about 25% of the 5 million tonne per annum will be the coke -- coking coal that we can use, which will be almost 25% of our coking coal requirement. So that provides a natural hedge to our coking coal requirement. And once Australia also reopens in the coming year, we will have additional 1 million tonne coking coal from there as well. So ballpark, about 50% of the coking coal will be covered through our own backward integrated coking coal supply chain.In addition to that, on the EBITDA, I'd like to comment. We have been saying that Angul, obviously, is more efficient plant, larger plant, largest blast furnace, well configured, closer to port. And we've been saying and writing The Street that Angul will become significantly cheaper compared to Raigarh. In the last quarter 3, that is the corresponding quarter 3 of last year, Angul's cost of steel was about INR 800 per tonne higher than Raigarh, right? And at this point of time, in the last reported quarter, Raigarh is about INR 1,000 more than Angul. So already INR 2,000 benefit has come in versus Raigarh in the last 4 quarters. And we see fair amount of opportunity in Angul because still ramp-up is going on. We've commissioned 2 coke oven batteries this year, which are providing additional INR 40-odd crore benefit per month, and there are other benefits. But if I was to just kind of list down the various benefits that are likely to come in Angul as we kind of ramp it up further, I can see almost INR 1,000 per MT of steel cost reducing further in Angul, which should partly get offset by the fact that CGP DRI may be a little bit more expensive. But overall, we will be able to kind of run the Angul plant significantly more efficiently and at a cost-competitive level versus Raigarh, which is again absolutely in line with our directions to the fleet.Now I start my commentary on the debt, which is important. At the end of FY '19, our net debt -- reported net debt was INR 39,084 crores. And we had said that we will through normal operating cash flows, we will want to bring it down by INR 4,000 crores to INR 5,000 crores. And I'm happy to report that at the end of the third quarter, in the 9 months ended December '19, we brought down the debt by INR 3,627 crores, which is absolutely in line with the larger guidance that we had given. In the last reported quarter, our debt -- net debt has come down from INR 36,501 crores to INR 35,457 crores, a reduction of INR 1,040 crore. I must also say that in the last 9 months, due to foreign exchange fluctuations, the reported debt has gone up by INR 417 crores. So if we just add this INR 417 crores to INR 3,627 crores, almost INR 4,000 crores of actual debt reduction has taken place.Now again, we've been working on our business to make it more and more efficient. So I would like to add at this stage that we have worked to make our working capital even more efficient in the 9-month period, and we've been able to kind of compress the working capital requirements by a variety of initiatives. I would like to say that in June 2015, at one point of time, our working capital cycle was almost 165 days, and we brought it down in the last reported quarter to almost 30 days. So there's been, over the years, significant compression. But even in the last 3 months, there has been a fair amount of daily rigor, weekly rigor to monitor the working capital, and we've kind of been able to compress the working capital cycle. In the reported 9-month period, through the working capital initiatives, we were able to kind of generate almost INR 1,200 crores, which has augmented our cash flow. And we -- as again, we've been maintaining that we are building additional export volumes, and we have started building in our capital structure export advances as a capital structure element. So by -- in the 9-month period ended December '19, we've been able to kind of gather almost INR 500 crores from there also. So ballpark, due to working capital reduction and due to some export prepayment cash flows that were generated, we were able to support the operating cash flow and deleverage at a faster clip, right?So with that, I kind of end my debt commentary. There is one commentary that has been requested for, which is on the other business EBITDA of around INR 240 crores. Several people have asked us the question. And I would like to take this opportunity to highlight. In the other business side, we have some income from our power business, some from our cement business. We have a machinery division. Then we have some bricks and some other byproducts, which are gases, et cetera. So all these categories contribute to other income. And then foreign exchange gain/loss also goes into that section. So clearly, in the reported quarter, we've seen the other income from all the categories that I mentioned ballpark of about INR 100-odd crores. And we've seen foreign exchange gain of around INR 120 crores also in that category. So out of the INR 240 crores, INR 100 crores is due to normal regular byproduct categories, which, obviously, as we grow our business will further grow, and they will grow in line with our business.The next category is interest cost where, again, people ask us the questions on the variance on the interest cost. If you see our global average cost of debt is around 8.55%, our debt has come down on a 9-month to 9-month basis by INR 3,627 crores. So our interest cost should have gone down by INR 78 crores in these 9 months versus the last 9 months, corresponding 9 months. But our interest cost on a reported basis has gone up by INR 41 crores. So there is a gap of around INR 120 crores. And I think this is the call where all of you can get absolute clarity.One of the things that has to be clearly understood that due to the new accounting standard of Ind AS 116 accounting, the lease rental accounting is now a part of the interest cost. In the last year 9-month period, we did not have INR 51 crores of expense, which is factored into the current 9 months because of the Ind AS accounting. Similarly, in Australian business in the last year, the interest expense of Australia was being capitalized. And this year, the capitalization is not happening. That is contributing to almost INR 75 crores of variance in the reported 9 months over the last 9 months. And further, in the Mauritius business, where we have 7 65 million of loan, due to the currency depreciation effect, INR 33 crores of additional interest has got booked in, in Mauritius versus the 9 months. So between these 2, 3 categories, fair amount of more than INR 100 crores of additional interest cost levers have been notified to you. In addition to that, because of increase in volume, our BG charges, our other syndication charges are at a little higher clip by INR 20 crores. But ballpark, I think if you were to kind of take back the major items because of Ind AS accounting and because of the way in which the JSPL is -- or Australian business is now accounting for our interest, which is being expensed off versus being capitalized and due to the depreciation in reporting the foreign currency interest cost, these are the 3 main issues.On the pledge side, happy to report, last quarter, we had reported that we will bring down the promoter pledge by INR 400 crores. We are on track, although the reported -- although the actual, the pledge has come down from a debt level from INR 755 crores to INR 737 crores, a marginal reduction from the peak of INR 1,151 crores. But we are on track and while this call has happened a little early, but over the next few days, we are absolutely on track, whatever solutions we're working on should help us to reduce the promoter borrowing by almost INR 300 crores. So I think that's important. On an absolute basis, the total shares of the company that are pledged at around 39.37%, which include about 13%, which have been pledged to the banks for nonpromoter borrowing matters as a digital collateral given to the bank. So other than that, the total pledges are just about 27% of the total company. So it's not a very large number, and at a direction level, we clearly see this coming down quite significantly.So with that opening commentary from my side, we -- our commentaries are over. The house is open for asking questions, so please go ahead.

[Nishant Baranwal, Head of Investor Relations]

Operator, before we ask the question, I request to everybody to please ask more strategic questions. We at IR are always there to help you with the data questions. [Operator Instructions]Thank you. With this, let's open the call for question and answers.

[Operator]

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

[Amit A. Dixit, Financial Analyst]

Congratulations for a good set of numbers. I have a couple of questions. The first one is on demand, particularly. Since we are guiding that we have started our CGP plant along with the DRI in Angul, where exactly do you see demand coming from? I mean the real demand. We have seen restocking quite apparent. But do you see real demand coming in? And if so, in which all segments?

[Vidya Rattan Sharma, MD & Additional Executive Director]

Yes, please. I'm V R Sharma, MD of JSPL. I'll reply your question. We see the steel demand in India and also in abroad, if you see that there is stable demand. So now the question you have asked is that where is the demand coming from. You see, we are not in commodity products, we are in the products which are a little special products, like, for example, the specialty players for the shipbuilding, specialty players for the oil tankers, specialty players for the cryogenic gases. So these are the areas where the demand is pretty high. See another good demand which is coming is the Indian Railway and the Metro Rails. So that is also a very good demand. Then the third product is the specialty structurals. And nowadays, we are in a big way not only to supply structurals as structure, but we are also giving the solutions for the high-rise, multi-story, commercial buildings. So that is another demand which is picking up very fast. Then the next is in the last 15 to 20 days, we have found the demand of TMT, that is rebars, that has also increased. Over and above, what we have done, there is a change in the focus of our overall basket where we have now exports -- started exporting quite substantial quantities. So our exports have increased multifold in the last 2 quarters, if you see. We are exporting at the rate of about 120,000 tonnes per month. So we are fully booked in terms of exports. We are fully booked in terms of plates. We are fully booked in terms of the rails and structure mills. So there is no dearth of demand. The additional quantity which is coming per 1,000 tonnes from DRI CGP and DRI route will be easily sold out in the market in India and also overseas market. Have I answered your question?

[Amit A. Dixit, Financial Analyst]

Yes, sir. I mean, you've answered it. Sir, the second question that I have is on the potential impact of iron ore price increase. Now NMDC has increased iron ore price. We have been hearing that Odisha miners have also increased it. And going by the initial, I mean, indications on The Street as far as the bidding is concerned, the iron ore prices are expected to increase further. So -- and we are still guiding for around INR 10,000 per tonne of margin in Q4. So just wanted to understand the overall impact that we would have -- we are anticipating in terms of iron ore price hike in the market. And how come we are little bit -- I mean, as the commentary suggests we are little bit insulated from that. So just wanted a little bit more clarity on that 10,000 number.

[Vidya Rattan Sharma, MD & Additional Executive Director]

Yes, very good question. You see the 10,000 number is already in place now. If you see November 30 prices versus the prices as of today, there's a net increase of INR 2,500. Now the question is the iron ore price increase, what is -- how it is going to impact the industry. First, let me tell you about the industry. The industry -- definitely, this is applicable to everybody in the industry. And the industry will definitely try to pass on this increase to the market because these are the uncontrollable factors in business like iron ore and coking coal prices. The customers, they also do understand because the customer is well educated today, well informed today. This is one. Secondly, we are very much hopeful that we will be in a position to meet out our 30% demand from our own mines, that is Tensa mines, and which is working very well. So we are already insulated by 30%. And balance 70%, if everything goes well, and as you know that this [indiscernible] coke where we will be allowed, we are hopeful, that we have already our stock lying in SMPL, this material, if it comes to us, then we are already insulated. So we feel that JSPL is in a better position in Q4 than the peer group. This is what we understand.

[Deepak Sogani, Chief Financial Officer]

Sir, can I add on to this, sir? I think the way I'd just like to add on to what our MD has given his commentary on this question, it's a very relevant question. Firstly, from a raw material cost point of view, obviously, the coking coal prices had reached a low of almost $135 per tonne. And they've started inching up a little bit, and now they're at $150 per ton. The iron ore prices have also gone to low INR 1,700, and they are now, right now, at INR 2,200 per tonne, right? So as per the trends in the industry, when the raw material prices inch up, in general, the steel prices inch up by, not only to cover the cost, but they cover additional margin. So that's how the trajectory happens that on the upward move, we see price increases, which are higher than the raw material increases. And when the raw material prices soften, then the raw material prices soften by [indiscernible] and the price competition happens more. So this particular period is actually beneficial because this will mean that there will be not only price stability, but we will see expansion in the prices. I think that's important to note.Secondly, I think based on how the China demand is going up and the international prices have started going up. The ex -- in China, the HR fee in October, was $438, now it is almost $500. So ballpark, what it indicates is that the China material in the global market is less. That again kind of gives very strong indication that we will be able to see decent price regime in the next few quarters. So that's one important point.The other thing that our MD just highlighted on the Sarda Mine stock matter, let me try and add to the color of the matter, right? As some of you will be aware that -- as some of you may be aware that we have 12.22 million tonnes of iron ore fines that are our own fines, owned by us, royalty paid by us, but lying in the Sarda Mine premises because that mine was shut down, right, by the court they had been asked to shut down. The good news is that couple of weeks back they've got a favorable order to restart the mine provided they pay their fines, around INR 900 crores fine they have to pay. But in general, if they start now, they get about 2 years of life, and the profit is significantly higher than the fines that they will have to pay. So I think it's a no-brainer economic decision for them to ballpark start. And if they start, anyway, we can evacuate these fines, which are now looking extremely certain. On the other matter, we were also in litigation in the court to give us permission to evacuate these mines because we have nothing to do with the Sarda litigation, Sarda shutdown fine, et cetera. So we were asking for permission to evacuate. Our hearings have been completed in the court. There were no objections to the matter. The Supreme Court has completed and said that they're just going to now reserve the order, and the order is expected anytime. We are hoping for a favorable order for us. And even if -- whatever timing up and down happens, sooner or later, and it's a matter of, we believe, a few days that we should be able to start enjoying the benefit of the fines that are lying there. Now the benefit of those fines are obviously many fold on one side. Whatever temporary disruption may happen because of the mine auctions, et cetera, we become completely insulated, right? That's one very large benefit. The second important benefit to note is that we -- if the mine starts, this mine is adjacent to our Barbil plant, and if it is connected by a conveyor belt to our Barbil plant, that will increase the velocity of raw material availability to our Barbil plant, which has the capacity of 9 million tonne per annum, but has been operating around 7 million, 7.5 million tonnes. Once this mine restarts, and we're able to kind of use the conveyor belt, et cetera, to get material here, we should be able to increase the production of our Barbil plant by almost 1 million tonne per annum. So we will have significantly -- we still -- we'll have additional pellets available for exports, which will further add to our cash flows. Further, the mines that come from this mine, Sarda Mine to Barbil, comes to conveyor, so we save almost INR 300 per tonne in logistics also. The benefits are multifold, and we are sitting at a point where all the matters are concluded, just the operating and the process parts are remaining, right? So that's it. Thank you.

[Operator]

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

[Rajesh V. Lachhani, Analyst]

Sir, my question is with regards to your deleveraging. So clearly, your focus on deleveraging is quite apparent, and you have further delevered in this 3Q FY '20 as well. My question is with regards to the quantum. Sir, basically, if I see your EBITDA was INR 1,820 crores, and your interest cost is around INR 1,040 crores, and even if we assume INR 150 crores to INR 200 crores of CapEx, I -- it will be -- can you just reconcile it how we have delevered by INR 1,100 crores in this quarter?

[Deepak Sogani, Chief Financial Officer]

So -- Yes, so let me -- again, I had given this as opening commentary as well. So there are 2 strong levers. Your point is valid. We had an EBITDA in India or overall global EBITDA of INR 1,820 crores. Interest paid was around INR 1,000-odd crores. Available was around INR 800 crores. CapEx was INR 200 crores. Net available was INR 600 crores. But the debt reduction is around INR 1,000 crores, so around INR 400 crores of additional deleverage has happened over and above the free cash flows available from the business, right? So I think to keep up our theme when I commented that we have been able to further improve the working capital efficiency as well as we started generating export prepaid advances, we are exporting more. And as a capital structure, we are now kind of raising against our trade additional advances. So the trade category, which is again a part of the working capital, both of these levers are kind of becoming quite favorable for us. And as a part of the capital structure, we further want to improve the efficiency of our working capital, more so the export prepayments. That particular part of our balance sheet is becoming quite positive, which is supporting the deleverage higher than the operating cash flow. So this is in line with our guidance that we want to deleverage, right? Focus is to find initiatives.

[Rajesh V. Lachhani, Analyst]

Great. Sir, my second question is with regards to the Angul CGP and DRI operation. So in terms of cost, can you just quantify how much lower is -- or how much higher is the cost with regards to Angul blast furnace and the Raigarh facility?

[Vidya Rattan Sharma, MD & Additional Executive Director]

Yes. You see this -- the operations have just started about 10 days back. So we are ramping up now. We started with 3,000 tonnes per day. Now it is 4,000 tonnes. The moment the production reaches to 6,000 tonnes per day, then we equalize the cost of steel making through BF route versus DRI route. And today, we are at 4,000, 4,200 tonnes per day. Today, it is costlier by about INR 1,000 to INR 1,200 a tonne, but which is very well within the limit of the overall costing. And it is giving us a positive EBITDA in terms of overall sales figures. So by the time we reach to 6,000 tonnes, because it is a process industry, so you have to have a coal -- consistent coal available, then washing the coal, then feeding to the gasifiers and then finally reaches to the DRI plant.So we are on line. So we have decided that within 15 days' time or 20 days' time, we'll reach to a level of about 6,000 tonnes per day, and we are on line with this. So everything is going well as per plan. And there is a ramping-up time, which is required for these kind of units because of the in-line process system, like coal to gas, gas to DRI, DRI to hot DRI, or DRI directly charging into steel-melting furnaces. So we are on the right path.

[Rajesh V. Lachhani, Analyst]

Understood. Understood. And sir, last one, if I may. Sir, we have a finished steel capacity of 6.55 million tonnes, and we are planning to produce 7.5 million tonne in FY '20. So I just wanted to understand what would be the product profile when we reach 7.5 million tonnes?

[Vidya Rattan Sharma, MD & Additional Executive Director]

You see the products, if you see overall in the -- in our basket because we have a very flexible bucket. The beauty is we have hot rolled coils, we have plates, we have specialty plates up to 5-meter wide. We have rails. We have angles, channels, beams, power transmission steel, that is flexible steel. We have so many other kind of steel for railway like corten steel for the wagons. So all these products, the basket becomes very large. So when we decide, we never decide on the basis of a particular set of baskets. So we are deciding that on the basis of availability of the market, we can maneuver our basket and the composition of the basket. So we have -- what we have done, that 7.5 million tonnes, how will it come? From 6.5 million to 7.5 million tonnes will be directly an impact of, one, the overall efficiency; number two, the DRI will definitely add to the production of this team. Then we watch the market, and accordingly, we move into market. Like, for example, today, we see that the long market is better than flat market. So we -- we produced more long than the flat. But we still maintain a minimum production of flat like coils and also like plates. But tomorrow, if we see that there is a change in the overall requirement in the market, so we are so flexible that within no time we can switch over to more products from rail mill or more products from our beam mill or more products from our specialty plate mill or from rail mill or from our hot rolled coil division. So we -- and then over and above, there's another product, which is called GPI, that's granulated pig iron, which is a very unique product in the country, and we are the only exporter today from the country who is exporting the GPI. So GPI is available in large market. So the basket is very big, very vivid. And we make our program accordingly that whichever market is giving us the best results in terms of EBITDA, then we can achieve that. So our Patratu is doing well as far as the rolling is concerned. Then exports are doing well, exports of billets and the GPI [indiscernible]. And hot rolled coil, we have 2 routes available today. One is hot rolled coil for the standard -- from 5 millimeter and above from our Raigarh's plant. And if need be, then we have next-door neighbor, our group company, GSL, where we can send our slabs, and we can get the coils made out of our slabs. So that is also a flexibility. Since we are very near to the port -- we are very near to Paradip Port and Gopalpur port, Dhamra Port. So it gives us an added advantage that we can export to the international market. So this is how we are arranging.

[Rajesh V. Lachhani, Analyst]

Sir, I understand that actually, like on more specific, sir, even if we operate at 90% of utilization level, the domestic usage would be 6 million tonne and still will be having 1 million tonne -- that is 1 million to 1.5 million tonne additional. So I'm saying our semi-finished product or GPI product mix would increase significantly next year. So that's where I was coming from.

[Vidya Rattan Sharma, MD & Additional Executive Director]

No. Because our rolling mill capacities are pretty high. For example, we have all rolling mill capacities today in the -- in our all the locations is more than 10 million tonnes. So up to 10 million tonnes, we can do the finishing. So -- but we're not adding water to the glut because we never like to maintain some products where we reach to a glut situation. So we will see -- our aim is -- we are a profit-making company. Be it semis or be it finished goods, wherever there is more profit, our aim is to make profit. So our aim is not to utilize the rolling mills, our aim is to utilize the steelmaking and then distribute into different products. So that is our aim.

[Operator]

[Operator Instructions] Next question is from the line of [ Ritesh Shah ] from [ Investor Capital Corporation ]

[Unknown Analyst]

Sir, I have 3 questions. Sir, first is we have debt repayment schedule for overseas operations at INR 1,800 crores. What are the plans to -- how do you plan to refinance this? And any particular update on Botswana? That's the first question, sir.

[Vidya Rattan Sharma, MD & Additional Executive Director]

So Botswana is on track. The PPA -- the SPA, rather, has been extended to March. I think the party has obviously concluded the diligence. They are trying to tie up the finances. They remain quite excited about the opportunity. So that's where the Botswana is. As far as the international debt is concerned, we have about $150 million of debt that is payable in Mauritius, which is in March, for which Botswana is one possibility, but we're also working out many other possibilities. A, we are looking to do a foreign currency bond in the Mauritius region. I think that we're preparing should happen in February. So that project is going on and should be kind of taking care of that particular repayment. But in addition to that, as we've been mentioning, right now, in India, we are seeing surplus liquidity coming in through multiple pools. We are just now citing almost INR 3,000 crores of iron ore stocks that will become released to us shortly. And as I've been mentioning that our export prepay balance sheet is kind of becoming stronger. We see -- the scale and size of the company we are, larger companies typically have export prepays, which can be in excess of $0.5 billion. Our prepays are much smaller. We just have maybe just about $100-odd million at this point of time. So there's a lot of headroom available in terms of our export prepay. And now that the pellet production will go up in India, given the fact that we'll have excess -- larger raw material available to Barbil plant and also lumps available from maybe the Sarda Mine once it starts for our operation in Angul and Raigarh, therefore some pellets can be substituted with lumps. We should be able to increase our pellet exports by order of magnitude, right? So I think all of these levers provide one very strong lever from an export prepay side, certain cash getting generated through the normal iron ore that gets [indiscernible] project anyway is on top of it, and Botswana is there. So we have not only plan A, but we have Plan A, B, C, D. Many plans, right? So we're working on all of them. Okay?

[Unknown Analyst]

Yes, sir. Sir, my second question is Tamil Nadu PPA 200-megawatt is gone. Earlier, we had indicated about 515 megawatt NHPC. Is there any update over here? Or are we looking at lower power volumes as we go into Q4 and probably into Q1? Also, sir, we had earlier indicated about West Bengal and Gujarat PPAs. Sir, any update over here?

[Vidya Rattan Sharma, MD & Additional Executive Director]

Well, the TANGEDCO PPA, which expired in August 2019 was at a pretty low rate, so it was not worthwhile continuing. And it was a medium-term contract, so it could not have been continued. However, NHPC embarked upon an aggregation scheme in which we were the frontrunners for getting about 500 megawatts of PPAs. But due to certain reasons, NHPC could not get the PPAs tied. And hence, the government decided to cancel the NHPC as an aggregator. They have appointed PFC to do the same thing because PFC had done it in the past. So they told PFC to redo it, and they have already issued the tender documents. The bids are being submitted another couple of days. And by the end of the month, there would be a reverse auction. Here again, we are anticipating to bid for in excess of 500 megawatts. So let's keep our fingers crossed and try to grab this to the maximum extent as possible.

[Unknown Analyst]

Okay. Sir, last question, if I may squeeze in.

[Nishant Baranwal, Head of Investor Relations]

Ritesh, Ritesh, Ritesh, I'll have to come here, buddy. I'm really sorry. There's a long queue, there's a very long queue, so we'll take them first. Thanks.

[Operator]

Next question is from the line of Atul Tiwari from Citigroup.

[Atul Tiwari, Vice President and Analyst]

Sir, just a very quick question on the status of Angul DRI and gasifier. How much is the run rate that you guys have managed to achieve as of now? And what is the plan of ramping it up over next couple of months? And is there any technical issue that you are seeing in the project?

[Vidya Rattan Sharma, MD & Additional Executive Director]

Yes. There are no technical issues. The plant is pretty stabilized. We are now finding the right quality of coal and the consistency in the coal supplies. So the MCL's Chairman, Mr. Shukla, he visited us in the last week. And Government of India has also given a great thrust and focus on gasification. If you see the statement given by honorable minister, Mr. Pradhan, in the last week, that is on 13th, in Kolkata. He has shown an interest to gasify at least 100 tonnes coal per year in the country for steel, for power, for fertilizers and for different sectors. So the government has the focus, so are the coal mining companies like the Coal India and MCL. And this is the reason the MCL Chairman visited our gasifier. He was so happy. And now he has already arranged from a particular mine that to maintain the consistency of the gasifier, they will supply us the coal from a particular mine, which is very close to us so that we do not face the coal shortage or the coal quality issues. So today, we are running at a rate of 160 tonnes per hour, and this will reach to 200 tonnes per hour very shortly. So our ramp rate was like this. We started at 140 or 150, then 160. Now our next target will be 170. So in a multiple of 10 tonnes per hour, we keep on increasing our production. So the plant is doing excellently well. It is performing very well as per the expectations. And I'm sure in next 3 to 4 days' time, we'll reach to a level of 200 tonnes per hour. That means 5,400 tonnes. And that is the capacity of this plant. This can go further high, but that we will see later. But our initial aim is 200 tonnes per hour production. Plant is stable. The gasification is stable. DRI plant is stable. There's no problem at all.

[Atul Tiwari, Vice President and Analyst]

And sir, any rough color on the cost that you are seeing in terms of the raw material? Is it comparable to the rest of Angul operations today are on the higher side or the lower side? Any rough color on that?

[Vidya Rattan Sharma, MD & Additional Executive Director]

You see, the rough color is when you make through DRI route and you have to buy coal from Coal India or MCL and then we have to use it into NOF, that is electrical furnaces or oxygen furnaces. So it is not through the BOF, but it is part of -- like BOF. Look, the advantage in this particular route is, first of all, the energy cost, because it is a hot link directly from DRI plant to electric arc furnace. It goes straight. So there is nothing in between except for a conveyor. So that is fed at [ 1,650 ] degrees centigrade, which is a very high temperature, and we save in terms of energy.Now as far as the cost is concerned, the cost depends upon 2, 3 things. One is what is the price of pellets and what is the price of gas. So the pellets, the Indian pellets, we are using our own internal pellets. If we compare the pellets at a cost, what is our internal cost and we compare with the gas at a cost of $7.5 per mmbtu, which is coming today, then we are at par with the blast furnace route at a level of 200 tonnes per hour. So today, we are running at 160 tonnes per hour. We're a little higher than the blast furnace route, but this will be overcome in next 3 to 4 days' time, will be same level of blast furnace route. So we will be -- we -- maybe we will be better than the overall costing because of the energy savings. So this is what we want to demonstrate to the whole world, we have the first plant in the world which is based on the coal gas that is called SynGas. And the world was watching that how this plant will run. So we have been running this intermittently in past also. But now we are running it regularly because there's a support from the Coal India and from the MCL. So thanks to them, and thanks to the Chairman of Coal India and the subsidiary of Coal India, MCL, Dr. Shukla (sic) [ Mr. Shukla ], and he has visited us and he has supported us.So I think there should not be any problem. The cost impact will not be there. The assets were idle and now we have to utilize these assets. So that is most important for us, and that will add about 1 million tonne production in a year, maybe 1.2 million tonne. So the question the other colleague of ours asked us that from 6.5 million, how it reached to 7.5 million. So this is the answer, that this 1 million tonne will come from the DRI route. And this is what was our initial plan, the business plan. So have I answered your question?

[Atul Tiwari, Vice President and Analyst]

Yes. Sir, and just one last clarification. The $7.5 per mmbtu gas cost, so it includes the raw material as well as depreciation and interest linked to the coal gasifier. So this is all-in cost of producing that gas? Or does it include only the raw material and not the depreciation and interest?

[Vidya Rattan Sharma, MD & Additional Executive Director]

I will tell you. Because there are 2 kinds of cost. When we take the total steel-making cost today, the whole world goes for the crude steelmaking. The crude steel making for each industry -- each company is having different cost parameters in terms of depreciation and interest. Like if we are telling that our cost of steelmaking through blast furnace route is INR 23,000, so apple-to-apple, we have to compare with the peer group, they are also at the same level, INR 23,000 or the best plants that we have in the country and maybe INR 22,800. So similarly, when we say that our steelmaking cost is INR 23,000, then it's INR 23,000 with the DRI route as well. Now the question is that where is the 7.5 million -- $7.5 because we take the coal, we take the coal -- cost of coal, and there are certain assumptions in life, which we had to do, like the washed coal. The washed coal, after washing, the coal is going to the gasification, whereas the rejects of this coal are being utilized for the power generation. So ultimately, we have to see out of the total pocket, so where do we land? So we are landing at a level where our cost of making steel through DRI route is similar to the cost of making steel by the route of blast furnace or any other methodology. So this is how we are concerned about. We are not concerned about in standalone because there's no different balance sheet for the plant. There is one common balance sheet, common interest, common depreciation. So -- but I can assure you that the cost is similar. And there are some added advantages. For example, the byproduct is changing the game because the byproduct of coal gasifications are like tar, phenol, solvents, gas oil, naphtha, ammonia, these are very high value-added products. So -- and when we say that the cost less recoveries, I mean, we come into positives. So that is a different thing. So once you come over here, we'll discuss with you plant in detail, okay?

[Operator]

Next question is from the line of Girish Achhipalia from Morgan Stanley.

[Girish Achhipalia, Vice President]

Just a couple of things on the power side. Your EBITDA per unit is roughly 1.3, 1.35 per kilowatt hour. Now with coal mines being auctioned or linkage being auctioned, you also suggested that you have access to cheaper coal moving forward. Just wanted to understand like what is the quantum -- because you have 7 million metric tonnes, which you auction at lower prices. So what is the EBITDA that, near term, you can generate? And over FY '21, I mean, how do you look at the coal mine or the auction or the linkage auction taking place?And the second question I have is on the interest cost on -- again, on the power side. If you annualize the interest cost, it comes up to 13%. So is there a reason why it remains at that level? I mean, is it linked to rating -- your rating in the power division? Or is there any one-off in the interest costs, which can come down on a going-forward basis?

[Vidya Rattan Sharma, MD & Additional Executive Director]

Well, regarding the auctions, I would give you a correction. I had mentioned 7 lakh tonnes and I think you have understood as 7 million tonnes.

[Girish Achhipalia, Vice President]

Yes. I apologize. Yes.

[Vidya Rattan Sharma, MD & Additional Executive Director]

Yes. So that 7 lakh tonnes is good for me in the fourth quarter. And I expect a much better EBITDA level in this fourth quarter without giving you specific numbers. But as regards the auctions are concerned, there are 2 types of auctions now the government has come out with. The first one is that they will be giving a linkage to the people who do not have PPAs. And then after winning that auction, they will have to get into a PPA with somebody over the next 2 years. If they are not able to enter into a PPA, then their linkage would lapse. Now that is not very exciting for JPL as such. More exciting we find is the commercial mining, which has been declared about last week. We are sitting over a belt of coal, and we have coal almost over a radius of 200 kilometers, there are a large number of coal blocks. We will be bidding for 1 such coal block, which is strategically located for JPL. And we would commercially mine it and use it in the plant. Our target is to bid for at least about 15 million tonnes of coal. And I'm sure the government having announced about 80 mining blocks, such a quantum would not be difficult at all. So the next financial year would start getting coal from these mines because some of the mines they are coming out with are already operational mines. So they would be able to deliver coal in the very near future.

[Girish Achhipalia, Vice President]

So there is no new approval for mining plan that will be required. I'm assuming the strategic asset that you're talking about, there'll be no new approval for mining plan which will be required here. So you could mine immediately.

[Vidya Rattan Sharma, MD & Additional Executive Director]

You see they are putting into this commercial mining auctions, mines which were already operational, like mines like Gare IV/7, okay? Now these mines already had mining approvals in place. And as soon as a bidder is declared, the previous mining approval would get shifted to the new mining company. So that would be a much faster process rather than developing a new mine because developing a new mine, I'm sure, will take about 4, 5 years. But such a transfer of mining rights would be done over a couple of weeks.And as regards the interest cost, our CFO would like to enlighten you on that.

[Deepak Sogani, Chief Financial Officer]

So I guess taking on the question of interest. So the interest is obviously a fixed cost, given the fact that we have debt of around INR 7,300 crore outstanding in the balance sheet of the power business, and the interest cost that has been kind of reflected in the financial results translates to about 11-odd percent, 11.11% or some such percentage, which is a blended interest cost at this point of time. I think the -- and I heard you talk about this being as a percentage of...

[Vidya Rattan Sharma, MD & Additional Executive Director]

13% interest rate.

[Deepak Sogani, Chief Financial Officer]

So I think the cost is a bit lower.

[Girish Achhipalia, Vice President]

INR 6,800 crore, is that the net debt number?

[Deepak Sogani, Chief Financial Officer]

No. The gross debt is INR 7,300 crores.

[Vidya Rattan Sharma, MD & Additional Executive Director]

INR 6,800 crores is excluding the working capital debt.

[Deepak Sogani, Chief Financial Officer]

So I think this is not the issue. Issue is, obviously, of the interest cost on debt side. Debt, obviously, is the cheapest debt per megawatt in the industry. Our competitiveness is the best because as the last aggregation came out from NHPC. We were the L1 by a huge margin. So our competitiveness has been established beyond doubt. Our debt levels are lowest in the industry, again, by a far margin. I think all we are now waiting for is to get some uptick in the aggregation that looks like on the anvil down the corner and some more coal cost reduction by the coal availability initiatives that the government is taking. And as and when we are able to kind of increase the utilization level of our plant, we're just seeing that the power business is at the cusp of making a very significant shift at this point of time. So next year, broadly, it looks like much better. Yes?

[Vidya Rattan Sharma, MD & Additional Executive Director]

Exactly.

[Operator]

Next question is from the line of Prashant Kumar (sic) [ Prashanth Kota ] from CGS-CIMB Securities Private Limited.

[Prashanth KP Kota, Research Analyst]

Sir, congratulations for a good result in a challenging quarter and the deleveraging that you have done during the quarter. Sir, my question is regarding next year's potential deleveraging. Going by your guidance of 7.5 million tonnes and assuming the spreads remain as they are now and they don't deteriorate, we are probably looking at -- and if you include the iron ore dumps that we could get from Sarda Mines, we're probably looking at a deleveraging potential of INR 9,000 crores to INR 10,000 crores, if I'm not wrong. Wanted to know your views on this.

[Vidya Rattan Sharma, MD & Additional Executive Director]

So I think our job is to, perhaps, save the current state of affairs and guide what we believe at this point of time. I think our earlier guidance of INR 4,000 crore to INR 5,000 crore delevered per year is quite intact. Some -- and that's on the net debt basis. Obviously, what we can see next year is -- so let me just try and add some more color. Clearly, our volume is going up. Therefore, free cash flow should increase. Our debt, obviously, has gone down and will go down. The scheduled debt repayment also, therefore, is going down over the next 1 year, 2 year, 3 year. There's a steep decline in the scheduled repayment of the debt. Obviously, we have the possibilities as follows. We can obviously deleverage at a higher clip or we can obviously have excess cash in the balance sheet to some extent to take care of a variety of risk management structures. So either ways, the net debt will certainly come down by a larger number than INR 4,000 crore, INR 5,000 crore, right? And that's what we would like to kind of say.

[Prashanth KP Kota, Research Analyst]

Great. Sir, just a quick book-keeping question. Sir, what would be the maintenance CapEx at a consol level on a full year basis, sir, across India, Oman power and the coal business?

[Vidya Rattan Sharma, MD & Additional Executive Director]

I think the ballpark other than India in power business, there is not much of maintenance. Ballpark, we're seeing about -- we've guided about INR 700-odd crore. And at this point of time, we are quite comfortably tracking it. So that's the number.

[Operator]

Ladies and gentlemen, we'll take the last question from the line of Amit Murarka from Motilal Oswal Financial Service.Due to no response, we move on to the next participant. The next question is from the line of Puneet Bansal from IDFC FIRST Bank.

[Puneet Bansal;IDFC FIRST Bank]

Yes. So my question is how is the inking of U.S.-China trade deal going to impact the Indian steel players, particularly JSPL. When the news came, the Indian metal stocks reacted positively to it. I wanted to understand it better.

[Vidya Rattan Sharma, MD & Additional Executive Director]

Yes. I'm V R Sharma again. You see, China and America, they've been talking for the last 5 years. They will sit on a table, then they don't sit on the table. One over another, there is a blame and counter blame strategy. Yes, in this whole situation, the whole world, not only Indian steel industry, but whole world is under trouble because the international financial market, the bond market, the stock market, the derivatives, everything goes haywire when 2 large economy of the world, they don't reach to a conclusion. We do not know what is going to happen because neither we control China nor we control America. So both are different economies and very large economies. Now India is itself a self-sustainable economy. India is a large country, 130 crore people, and we have demand available within the country. The only problem is whenever there are some hiccups in the Middle East, for example, or there are some hiccups in the international political situation, so our dollar to rupee, the whole exercise, the whole exchange rate goes in a different direction. So that opens opportunity and that also gives threat. So when it opens opportunity, we start exporting a lot. When it is a threat, that means we have to be dependent on the domestic purchases. So the question here is, you asked a very relevant question that what is going to happen. To be very honest, we have stopped thinking on Indo -- sorry, in China and American relationship. We have to have our self-sustainable model, and this is what we are aiming. JSPL has a full basket of the products. We are -- we feel that we are insulated as against of the U.S. and Chinese policies. So whatever they do, whether the international market goes up, goes down, we have different avenues to sell our products at a better price. So we are not concerned, and we are not worried about it. Yes, of course, the country is not -- country as a whole is not insulated because of the oil prices, because of the international financial market situation, because of the international bond prices, because the international -- the stock prices. So that effect definitely the financial markets do have. But as far as the JSPL's overall strength is concerned, we are not concerned -- we are not very much concerned about this. So we switch over to exports, and we switch over to domestic market looking to the revenues.

[Operator]

Thank you very much. I now hand the conference over to Mr. Sumangal for closing comments.

[Sumangal Nevatia, Analyst]

Yes. Thanks, Nirav. I thank the JSPL management for their time to discuss the results and giving Kotak Securities the opportunity to host the call. Mr. Sharma, would you like to give any closing remarks?

[Vidya Rattan Sharma, MD & Additional Executive Director]

Yes. Thank you very much. We are very much optimistic and hopeful that we'll be doing much more better in the coming quarter. And we assure to our stakeholders and our shareholders and the media people and also our respected investors, please keep faith in us, believe in us and believe in our capabilities. We'll sail through in a much better way in times to come.

[Sumangal Nevatia, Analyst]

Thank you very much.

[Deepak Sogani, Chief Financial Officer]

Thank you.

[Operator]

On behalf of Kotak Securities Limited, that concludes this conference. Thank you for joining us. You may now disconnect your lines. Thank you.