Jindal Steel And Power Ltd

NSE:JINDALSTEL

Earnings Call Transcript 2021-Q4

[Operator]

Ladies and gentlemen, good day, and welcome to the Jindal Steel & Power Limited Q4 FY '21 Earnings Conference Call hosted by IIFL Securities Limited. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Anupam Gupta from IIFL Securities. Thank you, and over to you, sir.

[Anupam Gupta, Vice President]

Thanks, Vasudha, and good afternoon, everyone, and welcome to JSPL's Fourth Quarter FY '21 Earnings conference Call. I would also like to welcome the senior management of JSPL, who has joined us, and I hand over to Mr. Nishant Baranwal, Head of Investor Relations at JSPL, to introduce them and take the call forward. Over to you, Nishant.

[Nishant Baranwal, Head of Investor Relations]

Thank you, Anupam. Good day, everyone. Hope you and your families and loved ones are safe and well during these unprecedented times. We can understand it has been trying times for all of you there and us. But we can say that with your support and players of our well wishes, we continue.So to introduce the management. Today, we have with us our Managing Director, Mr. V R Sharma; our CFO, Mr. Hemant Kumar; and our Head of M&A and Business Development, Mr. Kapil Mantri. Without wasting more time, we would request Mr. V R Sharma for his opening comments.

[Vidya Rattan Sharma, MD & Additional Executive Director]

Hello, good afternoon, ladies and gentlemen. I'm V R Sharma, Managing Director of JSPL. So first of all, I welcome you on this particular call. And I'm thankful to all of you for your support all the way to JSPL in last so many years. I'm proudly announcing that we have done a wonderful business last year. And in the COVID year, we started with lockdown and then we kept on working and we exported a lot. And finally, we made a record for EBITDA and the core sales in the first quarter, that is April, May, June, which was surpassed in quarter 2, that is July, August, September. And again, we surpassed our numbers -- financial numbers in quarter 3, and quarter 4 had been super-duper. We could reach to 2 million-plus tonne sales in quarter 4. And similarly, in the whole year, we could do 7.51 million tonne of production and 7.26 million tonne of total sales. And this has led us to a different league of steelmakers in the country. Your support and street support had been eminent and pertinent. It is seen by the records that more than 800% is the overall growth in the stock market of JSPL.We started the year with INR 63 per share and we reached to INR 500 per share in 13 months' time. So this is a super growth in terms of street is concerned. So that means the street has a lot of confidence in JSPL. We were -- in 2012, we were declared as the second largest wealth creator in the world. Today, I'm proudly telling you that we are the largest wealth creator or biggest wealth creator today in the country in steel sector and perhaps maybe in the world also. So the datas from the world are not yet published, so Mr. Nishant will share with you maybe after 1 week or 2 weeks' time.So overall, the things have been doing very well. We have a plan to reach to next year more than 8 million tonne production. Last year, growth was 19% in production and 20% in sales. Prior to this, we had 6.3 million tonne of production. And in 2019, we had 5.5 million tonne of production. So whatever we committed to our shareholders, investors, we have delivered. So 5.5 million, 6.3 million and 6.3 million to 7.5 million, and now we are aiming for more than 8 million tonne. Without adding any equipment in this 8 million tonne, we'll achieve. There'll be a small CapEx to reach to 8 million plus. That is just for repairing plants wherever some modifications are to be done, that we'll be doing.The year was full of challenges, the lockdown and then finally, the domestic market was all-time low. But we and our able team in export department and with our contacts in the international market we could do a sale of more than $1.3 billion from exports. And this revenue from export, $1.3 billion, is about 30% of the total revenue what we have generated. INR 1,900 crores is the profit what we have earned in the Q4. And if you see the overall JSPL stand-alone, the PAT is INR 7,154 crores in the complete financial year. And then we have gone to -- we already plan to do the divestment of JPL. And this will bring JSPL a very vibrant steel company, and we have been a position to focus more and more on steel. And we want that we should be through, numero uno means #1 steel company in the world, not in India. #1 does not mean that in terms of quantity and tonnage, the #1 means in efficiency, in productivity, in ethical behavior and maintaining the right amount of concern to ours CO2 emission, ESG and the overall business ethics. So that is what our aim is, our Chairman, Mr. Naveen Jindal is a very dynamic and vibrant leader. Under his guidance and able leadership, we all are working with 1 mission, 1 objective, 1 goal, and that is we will be a net debt free company in times to come.We had given a slogan to the street and to our lenders and also to our plant people and our team that we will be a 15, 15, 15 numbers company, what is 15, 15 and 15? INR 15,000 crores of total debt or below, INR 15,000 crores of EBITDA or above, and INR 15,000 crores of sales turnover. So this if we achieve, which is likely to be achieved in this financial year, then perhaps, we'll be top 7 companies in terms of ratios [Technical Difficulty] capacity with different kind of ratios what we calculate. So we will be in the top 7 companies in the country. So with these numbers, this ranking may change because other people are also working very hard, and opportunity that do exist in India and India is a happening place. And we want -- we believe in the India growth story. And with the reason we have done the divestment of our Oman plant. And whenever there is a right opportunity we get, we will not be hesitant in divesting in any other entity if it comes in our way, but we want to be very, very worth and very efficient [Technical Difficulty] within country.The country is aiming to reach 200 million, 300 million tonne of steel production. And today, there are only 5 families or 5 business houses, those who are very prominently making steel for the nation. So one is JSPL Naveen Jindal Group JSPL; the other is his brother JSW, Sajjan Jindal Group; and the next is Tata Steel; and fourth is Government of India company, Technocraft India; and now a recent entry of ArcelorMittal. So these are the 5 companies, which are commanding the market of about 55 million to 60 million tonne today, out of 100 million tonne what we produce. Balance 40 million, 45 million tonne is being produced by the other people, those who are in the group of 1 million-plus tonne. And there are lot many companies in the country, more than 240 companies in the country, there are induction furnace based organizations and they produce 200,000 tonne to 400,000 tones per year.So the challenge today for in front of nation is how to reach to 300 million tonne is the biggest challenge. And these 5 business houses, they have a great amount of possibility to meet out the expectations of Government of India to reach to 300 million tonne by 2030. Our neighbor, China, they have 1.5 billion people and they -- or 150 crore people as against 135 crores in India. And they are consuming 1,000 million tonne steel. And this year, they may consume 1.1 billion, that is 1,100 million steel. And we are just at a level of about 100 million plus. So there's a big gap in between #2 and #1, whereas the population is very minimum. The -- this means the more and more spending from government side will come in the infrastructure, and we are a special infrastructure steel company. Today, we are not in general commodities like roofing sheets or automobiles or 2-wheelers or 3-wheelers. We are not in that business. We are in the business of special steel to produce steel for infrastructure projects. So what our Honorable government ministers and our Honorable Prime Minister and Honorable Finance minister. Mr. Sitharaman, they are aiming to give a boost to the Indian infrastructure, so we are solution. We make cranes, we produce. We have already produced 1,080 head hardened rails. We have already produced 1,175 head hardened rails for the heavy hours to carry 75 tonne of weights, and this will be first implemented in South Central and Southeastern Railway. And soon, it will be a commodity, which will be -- or special product, which will be utilized and used in India. Today, we are the only company in the country who has produced 1,080 grade for the metro rails and who has produced 1,175 for Indian Railway for Heavy Hours.Apart from that, transmission tower is another agenda Government of India Power Grid Corporation of India is going to spend thousands of -- thousands crores of rupees to upgrade the power transmission lines from 230 kV to 415 kV and then finally, 750 kV. And this upgradation and resolution from 230 kv and above will definitely use more and more steel in terms of MLR and channel and beams, and this is where we produce the Power Grid Corporation of India's PGCL-approved specialty MLRNs to absorb that kind of wind load and the high-tension wire loads. So this is where we do present.Then the another dream project and very prominent project of Honorable Prime Minister, that is shipbuilding and the warship building. So we are the only company today in the country who are in a big way producing steel, specialty steel for submarines and also for special vessels. So our capabilities are jammed out. And Government of India is buying from us, Indian Navy is buying us and the private players are also buying from us. We are the only company today in the country having a specialty players for the cryogenic tankers. Today, we are seeing that oxygen is in great demand and -- but we need a special plate for the cryogenic tankers. So we produce cryogenic tanker plates and -- which is in big demand now, and I'm sure we'll be serving the nation in a much better way. So similarly, the other products we see, whether it is specialty beams, fabricated structure, round billets, square -- specialty square, blooms, we are in a big way and we are part of Indian infrastructure focus, Indian infrastructure boom.So in nutshell, the times to come are going to witness much more fruits for the company like JSPL. There are not many companies like JSPL in the country, those who have the productivity as we have. We have 9 different products. And all these 9 products are unique products in itself. So this is what we are aiming coming back on the oxygen. As you all know, the country has been passing through a severe pandemic or wave 1 or wave 2. People are speaking wave 3 God forbid, that any wave comes in future. It is -- we are combating and we are fighting a war, like biological war. I don't know who has initiated it. And nobody knows whether it is internal or external or it is act of God. It can be anything. But the steel industry as a whole has come forward. They are working with the shoulder to shoulder with Government of India. And our Chairman, Honorable Shri. Naveen Jindal, he has given the first tweet actually in favor of nation that, yes, even the last drop of liquid oxygen available in my plant is available for the nation. He has given a slogan, People First. So though we are sacrificing and we are compromising our total quantity on month-to-month basis for the last 15, 20 days time, the total reduction in the capacity will be about 9% to 10%. But that we can make up, we are sure. This does not mean that we will not produce 8 million-plus tonne in this particular financial year. We'll definitely do more than 8 million tonne. But today, the navigational approach we are seeing, we are seeing the bad weather. And in this bad weather, we need to have little longer route to supply oxygen to our countrymen, and this is what Shri. Naveenji had told that come what mean, we had to keep this pledge on and we have to save so many lives.Just for a knowledge, 1 tonne of liquid oxygen contains 700 cylinders of mega cylinder, that is big cylinder, D-type cylinders. And 1 cylinder, if it gives 1 life. So 1 tonne is giving 1 life -- 700 lives. So we supply every day about 100 tonnes. We have today's stock of 320 tonne. We are not denying anybody. If somebody comes to us for the oxygen, we always -- we are pleased to offer oxygen to them. And -- but Government of India has already fixed up a Nodal Agency, and we are working under the Nodal Agency, under the Ministry of Steel and Ministry of Home. And through the local commissionaire , they allocate us as to where these supplies will be delivered. And this is what we are doing. So in nutshell, we have -- we are contributing in nation's growth. We are also combating with the current situation. We have already installed more than 1,200 beds to accommodate the COVID patients in our -- from our plant or in and around the villages from our plant, in and around the vicinity of our plant; and 400 beds arrangements we have done in Angul; 400, we have done in Raigarh, including this hospital freedom. And then 200 in Patratu and 200 in Barbil. So as a whole, company is working in line with the government requirements. And whenever government will need more from us, we'll definitely will be a front-runner and we'll be supplying all those gadgets or all those resources whatever we can share and whatever is possible.So coming back on the steel business. Steel business, I'm sure, is going to stay a similar way and at least for next 2 years, the reason being is the -- a lot of stimulus packages have been declared by different government in the world. And around $17 trillion are going to be spent by 4 major economies. The one is America, of course, and another is China, and the third is Europe and fourth is India. So the $17 trillion in 4 economies in Europe, of course, is a cumulative that I told you. That means at least $7 trillion to $8 trillion will come into steel, and the $7 trillion to $8 trillion coming to steel issue some of money, which is to be spent by different governments and different countries in next 2 to 3 years' time. So this means the steel will be hot commodity. Today, looking from our Indian scenario and looking to the power by our various customers, we have -- we JSPL, we have maintained the price difference between exports and domestic, that is up to $200 or $250 per tonne. So we are supplying today to Europe at about $1,050 per tonne; to Southeast Asia about $1,000 per tonne; to America and to Canada, it is $1,300 per tonne. And we are selling in India at a price of about $800 per tonne. So that potential defines JSPL has capped for our long-term customers so that they survive, sustain. We take care of our MSME customers so that they survive and sustain. It is not only minting money at -- in a difficult time, but it is also seeing the social cause and the social responsibility in terms of maintaining good relations with our customers, those who are going to be with us for a long time. And we will maintain about 30% to 35% of the exports as the spot market and 60% to 65% or maybe 70%, we'll keep on supplying to the domestic market so that the very purpose of the India growth story is maintained very well.We are sitting in the hub of iron ore zone, that is Odisha and Chhattisgarh. So we are blessed with the companies like OMC, that is a government company; NMDC and by many other small and big players in the vicinity, those who are supplying us iron ore. So there's no shortage of iron ore for JSPL. We can source whatever quantity of iron ore is available, we can buy. Of course, the prices are different. In last 7 months' time, the total input costs have gone up by INR 15,000, that is about $200 a tonne. And this $200 a tonne has been passed on the customers also internationally and also domestically, but we have not tried to do any profit easy business. And unreasonably, we have now tried to mint money or to earn money. So the directions from our Honorable Chairman, Mr. Naveen Jindal, is very clear that we had to be very considerate and we have to see that in thick and thin, our customers are together, we are together with our customers. We support them, they support us. And whenever there is opportunity in export market to earn more money, so we can play the 30% to 40%, maybe 10% additional, and we can earn profit for the nation, and we can also earn precious foreign exchange for the nation. And this is what we are aiming to.We have very strong reserve people available with us. In total directly, indirectly 100,000 people are working in JSPL Group, and we have strong 30,000 people on our role. So for their health, safety, everything has been taken care of. Of course, we had 2 deaths due to COVID in 1 plant and 2 deaths due to COVID in another plant. But we are trying to mitigate this by more and more or by taking the preemptive action. And all these 4 deaths what has happened, these are mainly because the people, they started their treatment much later than what was required. But we are very much concerned. And we are traveling to our plants regularly to give the confidence to our people. Similarly, the -- our people in finance department, banking, our people in supply chain, our overseas staff and our people in the head office, they all are with the grace of God, and -- they all are safe, and we are taking care of our people and people are taking care of our company. We believe very strongly, Mr. Naveenji, he always says, that it is not company who makes people. It is people who makes a company, good or bad. So his trust and belief in people is paramount, and we all are committed to make our company a company of our dreams, to make India a company of our dreams. That's all from my side. We'll be discussing on the question-and-answer session. Thank you very much, and Jaihind.

[Nishant Baranwal, Head of Investor Relations]

Thank you, sir. I will now request our CFO, Mr. Hemant Kumar.

[Hemant Kumar, Chief Financial Officer]

Good day, everybody. Myself is Hemant Kumar, CFO of the company. I trust that you, your families and friends are staying safe and following all necessary precautions against the spread of COVID-19 pandemic in the country. The second wave of COVID-19 has impacted millions of fellow Indian citizens. The intensity of second wave has taken all of us by surprise. However, Indians have faced every situation with strong determination and have come together to help each other.First half of this year was a challenging period with uncertainties and complexities brought on by COVID-19 pandemic. Indian economy and domestic steel demand have been improving since then with accommodative policies, government spending and relaxation in mobility restriction. This quarter performance has been a stand out in terms of both operational performance, EBITDA and the cash flow, and helped the company to report one of the highest underlying performance for the full financial year, in spite of pandemic-related disruptions during the first half of the year. There is a distinct improvement in the company's operational and financial performance. The company is showing improved economics, better operations, better stabilization of inputs, enhanced capacity utilization and spreading of assets.I would like to mention, as our MD sir rightly mentioned, that there is an unprecedented performance even during COVID period, '19. And he also touched upon 5 key points. Nation being the first endeavor of JSPL and also the employees' health. And we are also, at the same time, focusing on highest ever steel production and delivery, and resulting into making our balance sheet very strong by expeditiously deleveraging our balance sheet. And most of the cost optimization initiatives deployed across our steel plants are already visible in our financial performance, yields desired results. We will continue to strengthen the foundation of our operations with unwavering focus to deliver on financial excellence and generate value for all stakeholders in these uncertain times.Coming to an update on financial performance of the fourth quarter and fiscal year 2021, we are happy to report that the company posted a record stand-alone steel production of, as our MD rightly mentioned, 2.07 million tonnes in quarter 4 FY 2021, compared to 1.93 million tonnes in quarter 3, trailing quarter '21, increase of 8%; and 1.54 million tonnes in quarter 4, corresponding quarter of '20, increase of 25%. JSPL stand-alone steel sales also shown a growth from 1 -- to 1.92 million tonnes in quarter 4 of current financial year compared to 1.87 million tonnes of quarter 3 '21. In quarter 4 of '20, it was 1.4 million tonnes, showing and registering a growth of 37% Y-o-Y. On a yearly basis, I am also pleased to inform that we have been -- we have seen around 19% growth in our production numbers, as also mentioned by our Managing Director, 7.5 million tonnes in FY '21 versus 6.2 -- 6.3 million tonnes in FY '20, and registering a growth of 20% NPS growth can be absorbed from 7.28 million tonnes in FY '21 versus 6.06 million tonnes in FY '20. As we follow the strategy of sweating our assets in harvesting, investment in Angul steel facilities in the current financial year, we will see substantial volume expansion in our Angul steel facilities in the current financial year. We will see. So the theme or the business direction is absolutely intact by sweating of assets, continuous deleveraging to continue.Now by commentary on the consolidated financials, please. We have reported gross total income of INR 13,213 crores in quarter 4 '21 versus INR 12,070 crores in quarter 3 of '21, increase of 9% on quarter-on-quarter and INR 7,658 crores in quarter 4 '20, registering a growth of 72% Y-o-Y, primarily driven by increase in sales volumes and improved sales realization. I'm extremely happy to report EBITDA of INR 5,287 crores in quarter 4 of current financial year versus INR 4,252 crores in the trailing quarter of current financial year, increase of 24% on a quarter-on-quarter basis versus INR 730 crores EBITDA in quarter 4 of financial year '20, registering a robust growth of 206% Y-o-Y. I would like to reiterate that the focused cost savings measures on all fronts, including operational, contractual and procurement has resulted in sustained reduction of costs resulting record EBITDA. In quarter 4 '21 PAT from continued operations stands out at INR 1,911 crores. On full year basis, gross total income stood at INR 43,284 crores versus INR 34,291 crores, again, registering a growth of 26%. And EBITDA on a yearly basis was INR 14,444 crores against INR 6,815 crores last year, an increase of 112%, registering a robust growth. PAT of INR 5,527 crores against a negative in the last financial year.On a stand-alone -- I would like to move to a stand-alone financials. We have reported gross total income of INR 12,319 crores in quarter 4 FY '21 versus INR 9,907 crores in quarter 3 '21, an increase of 25% in quarter-on-quarter. INR 6,767 crores in quarter 4 '20, an increase of 83%. EBITDA of INR 4,884 crores in quarter 4 '21 versus INR 3,908 crores in quarter '21, increase of 25% quarter-on-quarter and INR 1,562 crores in quarter 4 FY '20 increase of 213%. And in quarter 4, earned PAT is INR 3,426 crores, against, INR 2,226 crores of quarter 3 '21, increase of 54% on quarter-on-quarter as against INR 282 crores in FY '20. On a full year basis, the gross total income stood at INR 37,117 crores against INR 30,021 crores, increase of 26%. And again, I'm pleased to inform that EBITDA recorded was INR 1,355 crores in the current financial year against the last year of INR 5,777 crores, reporting a healthy growth of 126%. And similarly, I would like to mention my steel business has earned a PAT of INR 7,154 crores against INR 618 crores in the last financial. It is key to note that the PAT has moved 10 or 12x of the PAT which I made last year.On overseas performance, Mozambique, South Africa are doing good. We have given those numbers in our press release. You may refer those numbers from there. Let me shift my commentary on that side as you -- as we are mentioning that we are clearly focusing on deleveraging JSPL balance sheet by achieving its immediate goal of INR 15,000 crores bank debt, eventual goal to bring -- become a net debt-free company. The company has been working with a clear focus of spreading its assets, improving capacity utilization and deleveraging over the last few years. On a net debt basis, at the end of the quarter, we are reporting a net debt figure of INR 22,146 crores, which is flat, so much, INR 33,475 crores debt reduction as compared to last quarter of INR 25,621 crores. And we are pleased to highlight that in financial year '21, we have been able to reduce our net debt by a figure of INR 13,772 crores, which is in excess of our guidance that we have been sharing. In addition, we have gone other and beyond on back of strong free cash flows to make a prepayment of INR 2,462 crores to our term lenders, which is in line with our long-stated financial strategy of debt reduction and building the most robust balance sheet in the steel sector.Now our debt equity is below 1, standing at 0.92, and net debt stands, as on today's, below INR 20,000 crores. Below INR 20,000 crores, I would like to repeat. It is very important to note that JSPL's stand-alone is strongest balance sheet in the Indian steel sector with a net debt of INR 10,142 crores and our net debt-to-EBITDA less than 1. Less than 1, I would like to use that. The remaining debt comes from our underperforming overseas and power business. That continue to have a substantial debt burden and drag down not only our return ratios, but also calculating an ESG score. And I can say with the immense confidence, divestment of JPL, I would like to repeat, divestment of JPL will be a game changer for JSPL. We will bring our entire focus to our primary steel business in India, where we'll continue to have strong operating and financial performance and working tirelessly to become net debt-free company at the earlier. The most divestment, the post the divestment JSPL still have a much stronger balance sheet, enabling upgrades and calibrating lower interest costs and the re-rating of our stock as well. In addition, with an improved ESG score, JSPL will be able to expand its pool of capital, raising via international bonds and reputed equity investors who are keen to partake in company's future growth reason, especially on expansion plan for Angul from 6 NTP -- 6 million tonnes per annum to 12 million tonnes per annum. That is presently ongoing and will help expand the growth of India steel capacity in excess of 15 million tonnes per annum.Now let me give you a quick commentary on standalone interest cost. As you may have seen from our results, our interest cost has already come down by 20% on a Y-o-Y basis. And if we see even on yearly basis, it has come down from INR 2,611 crores to INR 2,187 crores. This is largely due to repayments, interest rate reduction. And on consolidated basis as well, the interest cost has come down by 12% on quarter-on-quarter and on trailing quarter by 28%. On a full year basis, there is a reduction of 18% as interest has come down from INR 3,768 crores to INR 3,093 crores. The reason behind this decrease being reduction in interest rate, coupled with reduction in debt. As you all know that JSPL was AA rated company in the past. That rating of the company is progressing well. And we are pleased to inform you the company has successfully upgraded its calibrating under A category -- A-rated family from BBB-rated family during financial year 2021. During financial year 2021, calibrating of the company has upgraded from BBB- to A by ICRA, to A- by CRISIL, A- by ISA. I hope with the combination of our efforts, including strong financial performance continues and substantial debt reduction, the divestment of our noncore assets, JSPL will again be a AA-rated very soon.Update on CapEx. We have incurred a CapEx of INR 160 crores in quarter 4 and 12 months, INR 459 crores, which is mainly sustenance CapEx. Further, I would like to add that considering present beyond steel industry scenario and strong outlook company is embarking fresh capital expansion to expand its present steel market over next 2 to 5 years to strengthen and improve its current operations and also implement expansion projects. More importantly, confirmation of JPL divestment is going to result in a cash flow of INR 3,000 crores for JSPL, which proceeds likely to be used towards paying debt or fund expansion plans of our steel capacity in Angul from 6 million tonnes to 12 million tonnes, thereby taking us in excess of 51 million -- 15 million tonnes per annum. While the retail plan for the expenditure is yet to be chartered out, CapEx outgo is likely to be in a phased manner. In addition, divestment helps the streamline company's operation by becoming a pure-play steel play-out with all its steel locations within India. One of the fastest-growing economies in the world, this divestment is expected to bring more management focus to the steel operations in India in achieving better operational efficiencies and aim for higher profitability. We believe that focus, coupled with improved return ratios, could act as a stronger trigger for credit rating upgrade and a re-rating of the company.Closing, I would like to make on my closing remarks. With the ongoing super cycle in the steel, over the near term, substantial debt reduction owing to divestment of noncore assets, including JPL, JSPL is expected to generate adequate cash flow for meeting all of its debt obligations or repayment. Funding the Angul expansion project and funding requirements of our overseas business. Now with enhanced management focus on Indian business, I'm confident. I would like to repeat that I'm confident, we will soon be a net debt-free company in the coming months. So with these headline commentaries, I would like to complete my initial commentary. Over to all of you for your question-and-answer section. Thank you very much.

[Nishant Baranwal, Head of Investor Relations]

Thank you, sir. And thank you very much. It is good to have Mr. Kumar also back with us. I would like to tell the audience that he too himself was suffering with COVID, but it's good to have him back here with us. In the same -- with the commentary, I know we have extended a bit of time. But given that we have all -- we are all happy about the results as well as we are appreciative at the time, we would want to actually extend the call by 15 minutes. So operator, we will extend the call by 15 minutes to take as many questions as we can. With this, I open the floor for questions. Please, as always, a request, please do not ask data questions. We, in the IR team, are always there to help you with those questions. Let's keep our questions on the more strategic level. Operator? Thank you.

[Operator]

[Operator Instructions] The first question is from the line of Ashish Kejriwal from Centrum Broking.

[Ashish Kejriwal, Senior Vice President of Metals and Mining]

Sir, while power divestment is a welcome step, I have 2 questions on that. One, is it possible that you can offset our CRP and ICDs together at one place and at one go? Or is there a possibility that we can change the moratorium of ICDs also in line with CRP, so that at least we don't have to go for all this complex cash flow?

[Hemant Kumar, Chief Financial Officer]

Ashish, thank you very much for your question. Hemant, this side. We would like -- we need to understand that both instruments are independent and different. And herein, I would like to invite Mr. Kapil Mantri, our Head of Corporate Strategy and M&A. Kapil, I'm pleased if you can come and please take up this question, please?

[Kapil Mantri, Assistant General Manager]

Thank you, Hemantji. So Ashish, by comparing our RPS to ICD or capital advance, right, we are here comparing apples to oranges. Please understand both instruments are independent, completely different, and were done at different point of times. First and foremost, we'll have to understand that ICD and capital advance at 9.7% interest was given 2 JSPL by JPL when JSPL was going through a challenging time. In fact, that's repayable on demand by JPL. And now with JSPL performing very well, JPL's debt servicing draw substantial comfort from the interest income that accrues from this ICD.Coming to RPS. Right, this is a large amount from JPL's standpoint given that JPL has been making losses over the last few years. However, I'm happy to share that our team at JSPL has been able to stitch an excellent deal with the buyer in favor of JSPL, where if JSPL misses any 2 coupon payments of RPS, then JSPL will automatically take over more than 80% voting rights of JPL. Therefore, JSPL is not only going to receive the INR 3,015 crores upfront cash from the deal at the time of closing, but has also completely protected it insist with respect to timely servicing of RPS coupon payments. So there is no risk or uncertainty from that perspective.In addition, I would also like to clarify that during the sales process, right, we had given all the bidders the option and flexibility to also buy RPS, along with equity, to ensure maximization from JSPL standpoint. It's so happened that all the bids that we received, they were -- they all decided to continue the RPS as it is with JSPL. We believe it's credit positive from JSPL's perspective, especially the INR 3,000 crores cash receipts. We've had discussions with credit édit agencies after announcing the transaction. The feedback is positive on the sales. And obviously, the next step will be seeking approval from banks. That should be done in the next 2, 3 months, hopefully, right? And also, what I explained to you so far is this conceptual thing, also just coming to a practical channel on ground in the. Please understand, both JPL and JSPL are governed by of loan, right? And neither JPL or JSPL banks would allow payment or offset of a subordinated unsecured ICDs. And needless to say, we have to obtain the NOC from the lenders to complete this transaction. Hope this answers. Hemantji, please see if you'd like to add something?

[Hemant Kumar, Chief Financial Officer]

Definitely, Kapil. You really explained well about the rationale and all. I would like to take it from here only. In fact, I'm happy to share that the proposed divestment was well received by our consortium of lenders. We were quite happy given the premium value and all cash offer of INR 3,015 crores, that would further strengthen JSPL balance sheet. In addition, as I mentioned in my commentary also, the divestment of JPL accelerate our vision to deleverage the company quite rapidly and the Board's vision to become a net debt-free company in the coming months.More importantly, we have given expansion -- began expansion of Angul from 6 million tonnes per annum to 12 million tonnes per annum, as I mentioned in my initial commentary, where we intend to partly fund the CapEx from INR 3,015 crores and strong operating cash flows going to super cycle, which we are witnessing, you are also maybe seeing in the steel sector, that has empowered us to even prepay INR 2,462 crores [Foreign Language] to JSPL lenders recently. I hope to share many such more positive developments on prepayments with you in the upcoming quarters. I hope, Ashish, this answers your query.

[Ashish Kejriwal, Senior Vice President of Metals and Mining]

Sir, just one small thing in this. So what I understand is that ICDs, which are payable by JSPL, what kind of moratorium we have or it's stable on demand? Just -- no, can be align the moratorium period of CRPs with ICDs for this 15 years?

[Hemant Kumar, Chief Financial Officer]

Kapil, if you can take this?

[Kapil Mantri, Assistant General Manager]

So -- right, it was the -- there was no moratorium. It is payable on demand as we stand today. However, as part of the transaction, this will not be payable on demand. This has a 7-year term. It will be payable in fifth, sixth, seventh year in 3 equal installments.

[Ashish Kejriwal, Senior Vice President of Metals and Mining]

Yes, Kapil, that's what I'm asking. When we have the flexibility to change the moratorium, can't we take this moratorium aligned with this CRPs, which is 15 years. Why 7 years? Because at one hand, we are giving a 5% and taking it as 9.7%, and that too moratorium also it's 7 years and that, 15 years at least. So at least I understand that ICDs at 9.7% was at a different time frame. But at least in terms of moratorium, is it possible to change it to 15 years, which can be aligned with the CRP moratorium? completely no?

[Kapil Mantri, Assistant General Manager]

Ashish, just to clarify 2, 3 things. One, the best way to look at the transaction is just not to mix these 2 instruments, which have completely different objectives, as I just explained. That is one. Having said that, with regards to the moratorium, this is the best result we could achieve from JSPL's perspective. In fact, our Board wanted the right -- and if it didn't exist, ask us to have -- ensure that the JSPL a prepayment right, if it wants, right. 9.7% isn't -- from the way we're seeing, isn't cheap from JSPL's perspective, right? And so this -- I mean, no even actually makes commercial sense. I expect you all the legal and tactical challenges of doing it. But it is -- what you're suggesting, doesn't even make commercial sense for JSPL to do.

[Operator]

[Operator Instructions] Next question is from the line of Ritesh Shah from Investec.

[Ritesh Shah, Analyst]

Yes. Congratulations for a very good set of operational results. Sir, I have 2 questions. One was, again, on the structuring. First is, sir, how should you explain or how should one understand the rationale of the transaction right now? We had a pretty good coal block allocation, 6 million tonnes per annum, probably it could have taken 6, 9 months to ramp up. The profitability for the asset could have been better. It could have fetched better valuations. So first question, amongst -- related to JPL as well as on timing. Secondly, we have given that it is on back of ESG. I'm a big fan of ESG. But so then the final question which comes through my mind why is it that the company not divesting its overseas coal assets, which haven't moved anywhere nor does it take from a ESG point? That's the second thing. Third is, we have spoken about growth, which is great. But then why are we going ahead with blast furnace first and then we DRI? I'm not sure whether DRI is gas or coal base. That's the third question. And when we are talking about growth, why are we not talking about reducing the...

[Hemant Kumar, Chief Financial Officer]

Ritesh, if I can come in. Let's limit ourselves. There's a long queue, if we could limit ourselves to 2 questions.

[Ritesh Shah, Analyst]

Yes, just 3 questions Nishant over here. So I think one is on timing, second is on ESG and third is on capital allocation. I think all 3 are permanent -- are pertinent. I have more on capital structure. I'll get back in the queue.

[Hemant Kumar, Chief Financial Officer]

Okay. I think you asked being the rationale of divestment and all. I would like to say the rationale behind the deal is straight forward and in line with the Board's reasons to pursue debt reduction via multiple initiatives, including divestment of noncore businesses, especially underperforming ones that are a drag on JSPL balance sheet, performance and growth plans in steel. By saying this, again, I request Kapil Mantri to walk through the larger purpose and the benefits and strategic initiatives taken for divesting JPL for its futuristic growth of JSPL and rationale behind it. I request Kapil to take it from here.

[Kapil Mantri, Assistant General Manager]

Thank you, Hemantji. I think you asked a couple of questions. Let me try to address all of them. One, with regards to ESG, that's the first point. I think that's the fundamental for JSPL. We've decided to be our environmentally conscious company. And obviously, we now understand the future is about being clean and green, right? So that's the key motivation growth driver for the company going forward. JPL divestment is also part of that, I mean, obviously, apart from debt reduction. And you mentioned about the international coal assets, et cetera. We are open. At various point in time, we have had discussions with different people. And at suitable time for the right value, we may look at divesting tools. So we've been open to that, definitely. Obviously, there will be some ESG angle, which will remain because of the nature of business we are into steel making. But wherever possible, we are making attempts to reduce that. So that is one.Second, on the rational, I think the rationale is threefold, which is ESG being carbon neutral, reducing carbon footprint, that is number one, clearly. Number two, which is reduction of debt. That's been our stated position. We have been consistently working on it. Number three is focusing on steel in India. And so those are the 3 biggest rationals for us to work on it. Does this answers or if you have something else also?

[Ritesh Shah, Analyst]

I have follow-up questions if Nishant permits.

[Kapil Mantri, Assistant General Manager]

And just to add to this. Ritesh, just to add to this on the ESG point. You'd be -- and it is for all of us. You'll be glad to know that now we actually have a board monitored committee, which is looking at sustainability, and the goals and the targets for the entire group. So that's an addition that we have now. And so that's where we are actually heading.

[Ritesh Shah, Analyst]

Nishant, can I ask a question to Sharmaji and one Kapil, please?

[Nishant Baranwal, Head of Investor Relations]

Ritesh, if I could ask you to get back in the queue.

[Operator]

The next question is from the line of Sumangal Nevatia from Kotak Securities.

[Sumangal Nevatia, Senior Vice President]

So first question pertaining on the JPL divestment topic. I just want to know what is the comfort level that JPL will be flat positive, and we would turn the dividends on the RPS? And also what Kapil mentioned initially, the 2 coupon miss gets their voting rights. Does that also a PAT loss, also count as a coupon miss? That's my first question.

[Hemant Kumar, Chief Financial Officer]

Yes, definitely. If there is a PAT negative, there would be a coupon miss.

[Sumangal Nevatia, Senior Vice President]

Okay. And then the second one, I mean given that JPL has been loss-making since the time was commissioned given the registration of the sector, so what confidence we have that we will basically accrue these dividends in the near future? Just some thoughts on that?

[Hemant Kumar, Chief Financial Officer]

Kapil, if you can take this?

[Kapil Mantri, Assistant General Manager]

Yes, yes, Hemantji. Yes, I'll take the second part first, right? Even if JPL misses coupon -- the coupon, because of not making profit, even in that case, the voting rights kick In. So we are, as JPL, completely secured from that perspective. Obviously, we all know, JPL has been going through a tough time, and it's difficult to -- in power markets, it's difficult to estimate when will a company -- we become especially in JPL villages. We did last 7, 8 years, we've been hopeful. And annual plans -- year-on-year, we've been estimating higher ELF. We've been projecting -- signing up of some PPAs also. So it's slightly uncertain territory we are in. So it may be difficult to actually comment on future performance. But if for some reason it doesn't happen, then we are completely protected.

[Sumangal Nevatia, Senior Vice President]

Okay. And sir, a follow-up, I mean given the deal is -- this is my second question. Yes, so the follow-up. I mean given the deal is dealing with promoter entity, I mean what comfort we have with the equity contribution capability? And will that lead to, I mean further sledging of shares of JSPL?

[Hemant Kumar, Chief Financial Officer]

Kapil, shall I take it?

[Kapil Mantri, Assistant General Manager]

Yes, Hemantji. Please, go ahead.

[Hemant Kumar, Chief Financial Officer]

As far as JSPL is concerned, I can't talk about on behalf of the acquirer, and we don't have any insight in their sources of funds. I think they are bid considering the availability of. However, from JSPL perspective, we are very clear that there would be -- promoters at least are very clear, there would be no loan against shares or JSPL's share pledges. In fact, the is very clear to bring down pledge down to 0 in coming quarters, definitely in next 12 months time?

[Sumangal Nevatia, Senior Vice President]

Sir, just to conclude with 1 suggestion, I mean largely accruing investor fee plan. I mean the transaction is a great step, but it's a complex one given the multiple securities involved rather than a straight-away debt and equity transfer. So if it's possible, it would be -- I mean really well appreciated by all community if one can simplify the transaction or at least what initially Ashish was alluding to, match the tenure and the inflow, outflow of funds of all the outstanding securities, the RPS and the ICDs because given the 20-year outstanding tenure, it's quite disconcerting to have outstanding transaction with related party. So that's an only suggestion. Thank you and all the best, sir.

[Hemant Kumar, Chief Financial Officer]

Okay. Well, your solution is -- Kapil? Okay. Next? You can take next call?

[Operator]

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

[Gaurav Rateria, Research Associate]

So 3 key points I had. Firstly, will JSPL need to give any corporate guarantee for the loans of JPL with respect to this divestment transaction? Secondly, how do you plan to mitigate the risk of rising price of iron ore? My understanding is that the Sarda Mine inventory would be largely over in the current quarter and from next quarter, you will have to keep buying from outside. And thirdly, when you said that you want to become net debt free, this is after taking into account the growth CapEx? After that, you're saying you will become net debt free? Or there will be some more debt, which will be there in the balance sheet because of the new growth CapEx?

[Hemant Kumar, Chief Financial Officer]

Okay. I will take first question of corporate guarantee. I'm happy because now it's going into a new acquirer or buyer. There's no portion of now providing a corporate guarantee from JSPL per se as such. And we are in the process of taking NOCs from the consumer lenders. And second, iron ore question. I request MD sir to take that question. I will come to a third one straight away, net debt fee.Net debt free, we are talking about as we are in -- as everyone is witnessing a super cycle, as you may be also, our endeavor would remain to use internal accruals to fund our CapEx going forward. But our overall mantra, driven by our MDAs, 15, 15, 50, that will continue till financial year 2023. Now to our MD on iron ore, please. Sharmaji?

[Vidya Rattan Sharma, MD & Additional Executive Director]

Yes. Can you hear me?

[Hemant Kumar, Chief Financial Officer]

Yes, sir.

[Vidya Rattan Sharma, MD & Additional Executive Director]

Am I audible. Can you hear me, Hemant?

[Hemant Kumar, Chief Financial Officer]

Yes, sir. Yes, we hear you, sir.

[Vidya Rattan Sharma, MD & Additional Executive Director]

Okay. So iron ore, if I understand correctly, the gentleman was asking...

[Operator]

Sorry to interrupt, Mr. Sharma, we cannot hear you. your voice is breaking, sir.

[Vidya Rattan Sharma, MD & Additional Executive Director]

What about now?

[Operator]

This is better. Please go ahead.

[Vidya Rattan Sharma, MD & Additional Executive Director]

Okay. So the iron ore availability in Odisha is in abundant, as I told you. Whether It is SMPL functioning or not functioning, SMPL giving to us or not giving to us, that does not matter. Yes, we had stock in SMPL, which Honorable court has allowed us to pick up, and that we have picked up from last year, February to till now, and that has also brought a good amount of. And 6 years, we have been working without any SMPL material. And we have -- as I told you, we have a long-term arrangement with the Odisha Mining Corporation, and we have some another MOUs with some of the private miners in the state. And we are also regularly buying from NMDC. So -- and in times to come, as declared by Government of India, the Steel Authority of India has to sell about 25% of their iron ore produced, what they do from many plants -- from many areas, and so is the Tata Steel. So I think this will be a regulation that 25% iron ore has to be sold to the people, those who do not have iron ore mines. So there should not be any shortage of iron ore in the country. We have more than 30 billion tonne of iron ore in the country, and many of the resources are yet to be explored. So the consumption of iron ore in India is very low, and we will not face any problem as far as the raw material security is concerned.

[Operator]

The next question is from the line of Vishal Chandak from DAM Capital.

[Vishal Chandak, Research Analyst]

Everyone is talking about steel super cycle, super cycle. But we all know for the fact that the moment China tightens the money flow, the cycle will dry down within a matter of a couple of months. So the first question is that if the steel prices were to correct sharply from the current levels, would we still continue with our CapEx plans? And what is the EBITDA level at which we are comfortable given our CapEx plans -- for our CapEx plan? Second, there has been a lot of discussions about government imposing either in export duty or reducing the import duties to ensure that the steel prices are trending downwards. Now if the government has, as a matter of policy, intervenes in rising steel prices, when they have done practically, nothing when it came to the bottoming out of the steel prices, then do -- as steel makers, do we still continue to expand or we look at protecting our balance sheet for the downturn? So what's your view on that?

[Vidya Rattan Sharma, MD & Additional Executive Director]

Yes, I will take your last question first. First of all, we should appreciate that India is a free economy. Number two, we are -- today, we are free to import steel in India and the duties are negligible from 2.5% to 5%. In a product of $800 or $1,000, 2% is negligible, the $16. So even if the duties are scrapped and they are made 0, still the Indian steel is much cheaper, at least by 20%, cheaper than the imported steel. So import of today, we want to have in the country, it will be about $1,000 or $1,100 per tonne, whereas the -- and we are selling steel at a price of about $800 a tonne or $750 a tonne. So there is no point in importing the steel in the country even if the duties are brought to 0.The other point is the government spending in infrastructure, that has to go in different ways. The price variation clause and the projects are to be incorporated. And the overall inflation, where does Government of India want to reach, that has to be seen. India is not insulated economy. India -- whenever there is a problem in the world, so the problem or opportunities, they do exist in India also. So we are part of free world. And today, we are not dumping steel anywhere to maintain the prices, so it is not that. The third point -- fourth point you have asked, China. China is -- they have their own consumptions. They are going to spend $5 trillion or $6 trillion in their own infrastructure. And they do not stop any plant unless they restart -- unless they start some new plant. So they were -- for the last 20 years, if you see their record, so their record is super. So they have been growing at the rate of 10%-plus in steel and sometimes 12%, 15%, and they are going to maintain it. Here, exports are hardly 80 million to 100 million tonne in a year. And this year, this will be too less. And out of 1,100 million tonne, so 80% -- 80 million tonne is only 7%, 8%. So similarly, India also has put together around 10 million tonne of exports. And then around India use to import about 10 million tonne steel. So this was getting us neutralized. So with the FDA assigned by Government of India with many countries like Korea and Japan and other Southeast Asian countries, the opportunity and the facility is still available for the Indian importers to import steel from Japan or from Korea, but they are unable to do so because the domestic steel is available at a cheaper price.The next point you asked whether if China slows down, whether the expansions will take place or not? The expansions, basically, is a country's requirement. It is not the specific requirement of any company. But we are a business house. We are -- we need to make profit. We want to be in business. So if the opportunity is available, then definitely we want to grow. Now the point here is our aim is to grow without borrowing money from the market or from the lenders. So when we have decided that we do not want to get into trap of debt as we were in 2016 and '17, and part of 2018, so we have learned a big lesson that no expansion is to be done by borrowing money. So our Chairman, Mr. Naveen Jindal, he has very clearly a slogan to us, Earn and Invest, E&I. You earn profit and invest, flow back the profit for expansions, modification, modernization, research and development or whatever. We are not -- our appetite is not to become #1. We are not hungry behind these capacities. We will go very judiciously, and we will not cross our means to expand. So if we can expand 2 million tonne a year, we'll do 2 million tonne. If we can expand 5 million tonne, we'll make 5 million tonne. If we can expand only 1 million tonne per year, we'll expand 1 million tonne per year. If tomorrow, we feel that the expansion is not at all suitable, we will not expand. We are a flexible organization. So this is what our purpose is. And I'm sure under the leadership of Mr. Naveen Jindal, we will be in a position to sail through in a much better way. And our overall exposure in the market is limiting, and we have reduced our debt from INR 46,900 crores to this level today, which is INR 19,300 crores. And if we take the other divestments on the annual, that will be only INR 12,000 crores. So this a very healthy balance sheet. So 15, 15, 50 is about to be touched very soon, maybe this financial year. And rest assured, we are not in a race to burden ourselves. We are not following somebody who has put the label behind his car, don't follow me, I'm going to hell. So we are not going to go to hell. We'll keep our company safe, secured and very robust. Thank you.

[Vishal Chandak, Research Analyst]

Sure, sir. Just one more question. We have mentioned that ESG debt and focusing on steel has been our key priorities. Now we have hived off assets like Oman and JPL, which have been servicing their debt through themselves. But while we have retained assets like Australian coal, which is still not even started output. So any thoughts on it? Would it be more prudent if you would have divested the Australian business to the promoters before divesting the Oman or the JPL, which was still generating EBITDA and were servicing their debt, even your targets as well?

[Vidya Rattan Sharma, MD & Additional Executive Director]

Yes, you're right. I agree with you. Your point is very well taken. You see what is sold in the market? Where ever there is a demand, that is sold in the market. And from where the demand comes? When the trade-off is favorable, then only the demand comes. Today, because of political issues in between China and Australia. China is not buying any coking coal from Australia. And the Australian mines are bleeding because their prices are somewhere about $100 a tonne, which is just very near to their cost. The cost of mining in the country is about, average, I'm telling. Average is about $65. By the time it reaches to port or they do the washing in case they need to and they do the blending, the cost goes to about $75 to $80. They are selling today, FOB is somewhere about $110 or $105, maybe sometimes $120, which used to be once upon a time $310 and $315. So the amount of profitability was superb at that time. We entered in this particular business when the cycle was really a very paying cycle. We were -- when we bought these mines, the cycle was about $200 plus. So today, the cycle is only $100 or $110. So we have to see the geopolitical environment. So with the driving of Australia with America in a war against Pacific Ocean, so called, so the China has reduced business with Australia, and they have reduced, reduced with the coal -- coking coal. So I'm answering following one. The moment the market improves, for the moment, China starts buying coal from Australia. The coking coal prices will shoot up. And this may shoot up to about $170, $180. And the discussions have been going in between China and Australia. Hopefully, there should be confirming shortly. And then it will be the right time to find out the right investor or right buyer to divest these mines. We believe in the India growth story. And we are also not interested in having these mines, though we need coking coal, but we -- maybe we will divest 30% or 40% or 50%, and we'll keep about 5 million to 6 million tonnes or 7 million tonnes coal coming to India from the Australian assets. So we are not a distressed seller today. If we become a distressed seller, then we don't get value for money. If you wait a little, then the trade-off can be better. Hope I answered you?

[Operator]

The next question is from the line of Prashanth Kota from Dolat Capital.

[Prashanth Kumar P. Kota, Former Research Analyst]

Sir, we have been a big fan of JSPL in the way they do the business. And I've been tracking and covering the company for more than a decade now. Sir, and we have always been thinking that the Oman versus the power assets are all integral to the company. And some of the investors also who invested last year, a couple of years ago, have been thinking. Sir, now, all of a sudden, management is saying that these are noncore assets and. And it is not that these are dead and not generating any EBITDA. We are reducing debt, but at the same time, we're also losing a lot of EBITDA. So net debt EBITDA losses -- net debt going away is not that remunerating on the face of it. So coming to future, in terms of -- what are other assets that the management thinks is noncore for example, the -- do we think that pellet plant is also noncore? Or anything else on the card, just so that we are all well prepared, sir?

[Vidya Rattan Sharma, MD & Additional Executive Director]

So I think our Investment Manager -- Divestment Manager and Chief, Mr. Kapil Mantri, will reply your question.

[Kapil Mantri, Assistant General Manager]

Thank you, sir. So one of the important thing to understand, and obviously, for example, JPL has been one of our premium methods, right? We were proud of what we built. Now core, noncore, asset values, all that are valid and true at one point of time and it changes, right? So we are an agile company. We are forward-looking company. So what -- the JPL was it a phenomenal entity, but we've been wanting to revise this. We are struggling for last 9 years after reallocation. The JPL is performing, all our efforts at more or less similar plant load factor, more or less similar with calculations. We've done -- we've seen cycles, elections, this, that and we are positive and optimist. And we've been running the transactions for Jindal Power Limited. We've done 2 full-fledged transactions in part. While we could sign an agreement with JSW didn't go through. Other time, we did have a term from a foreign investor, but it couldn't make it to work or the value didn't work. So we've been -- this has been up for some time. Fortunately, at this time, we could complete the transaction. And similarly, Oman was a focus area because point of time, but now we work in India. We want to be focused on India, and that's the main fundamental point, right? JPL, even if one considers its core, right, it's almost 33% of the debt. It only gives 10% of EBITDA for JSPL, right? So we do not consider it significant enough. We do not accept something we are very clear about. We do not consider coal as future for anybody, especially for JSPL. And that's why we don't think JPL has any value in the scheme of things the future is -- I mean here the situations are unfolding to be with JSPL. And Prashanth, If I could just add before taking the next question that -- you would appreciate that as a company, we've been very nimble. We've been nimble with the changing times. We've been nimble to actually better our return ratios after each divestment that we've done. And so that nimbleness will continue. And as and when we take steps towards any other further divestments, we definitely keep the markets posted.

[Nishant Baranwal, Head of Investor Relations]

I also would like to add. Nishant here. As everyone on the call may be aware, there are too many standard thermal power assets, even available in NCLT. That remains unresolved. So you can take an example of KSK Mahanadi, Meenakshi, Seemapuri for instance, some of which have pulled PPH that are long-term and yet, there are no takers for these assets. This is a reality on the ground. I just wanted to mention this, Prashanth. That's all.

[Hemant Kumar, Chief Financial Officer]

Operator, we'll take the last question?

[Kapil Mantri, Assistant General Manager]

I would like to -- just 1 moment sir. I'd like to add a couple of more points on the previous question. Kapil Mantri here. These are 2 parts. One, and I'll tell you a specific example. 3, 4 years ago, we were for almost 1.5 years in discussion with the Japanese strategic partner for doing some arrangement, doing some or getting into a joint venture in JSPL. The single most important reason that will go through, right, was presence of Jindal Power Limited with JSPL and the thermal and coal exposure. That's opportunity. They love their asset. They love JSPL. Everything else. We engaged with them 1.5 years. So that is one. a strategic perspective. The second, with regards to steel [indiscernible] in India. We believe that India is at all the future of steel in the world, it's India. For 2 primary reasons: one, the kind of growth we are expecting in the country, in general; and two, the cost advantage, which India has because of the cost of iron ore and availabiity of iron ore. That advantage of cheaper iron ore does not exist in Oman, for example, right? And it will never exists because it imports all the raw material and exports most of the finished goods. So that's the situation. I mean India is phenomenally well placed compared to Oman. And I told you, Jindal Power limited. Thank you.

[Hemant Kumar, Chief Financial Officer]

Operator, if we can take the last question, please?

[Operator]

Ladies and gentlemen, this will be the last question, which is from the line of Abhijit Mitra from ICIC Securities.

[Abhijit Mitra, Analyst]

The question is more on the Angul acquisition or Angul CapEx, on the future CapEx of 6 million tonne, which has been announced. First of all, how to look at this capital cost of $400 per tonne? It seems a bit on the lower side. So when we sort of break it down into competence, we see that the downstream has largely been unannounced barring the Hot Street mill. So any thoughts on sort of augmenting it with future downstream or rolling capacities? And also to sort of testing some thoughts which might have gone into creating stand-alone AF, which is fed by scrap, given so much focus on ESG. So some clarity on these few issues would be great?

[Vidya Rattan Sharma, MD & Additional Executive Director]

Very relevant question. First of all, expansions, what we are planning or what we have declared, that will be for the intermediate products and not the finished products. For example, the coils, it is a finished product for many, but otherwise it's the intermediate product when the coal rollers they buy it. So we are not going to the coal rolling or tube making, pipe making, color coating, galvanizing at the moment. So we are going to produce coils, which is a very hot commodity as of now, and this is going to sustain and remain in times to come also. Because of multiple activities happening in the country, the hot hold coil consumptions, as per the projection, the market will grow on a Y-o-Y basis about 10%. So when the market is Y-o-Y basis 10%, then there'll be huge vacuum and the people, those who are in their business, they will definitely be in a position to sell their goods faster. The next point here is the overall cost of per tonne of steel vein and how it sets to at a lower number, what we have declared. You see this is like a brownfield expansion. And neither -- the railway lines are to be laid nor the water pipelines to be laid, nor the roads are to be made and nor the other infrastructure, which is required like electrical, substation, power, so these are toy to be installed. So this is a bare minimum requirement for the plant and equipment. And we have our own fabrication division. We fabricate the structure. And then we have our own civil engineering team. So civil also done in-house. And finally, we have to just bring the critical components. For example, if we -- for the blast furnace, and the total import in the blast furnace is hardly about INR 180 crores. Balance everything has to be produced given India. And we -- fortunately, we have in India our own capital goods building facility that is in Raipur, so where we make the machinery for the steel plants. And we'll be utilizing our capital good industry, and this is also being promoted by Government of India now that the capital goods must be made within the country. And this is what we have aimed for, and we'll be manufacturing our own plant based on some of the basic engineering and some of the -- based on some of the proprietary items what are likely to be imported. So this is the reason that the overall price -- overall cost, what we are selling, it is quite low. Had it not been there, then definitely -- and then the international barometers or the Indian barometers or the yardstick, what people maintain, that would have been maintained accordingly. So today, we have the opportunity to grow at the lowest cost, and we can grow in a fastest pace. So this is the reason we have taken these numbers. And mostly, the equipments are repetition of the previous equipments. For example, blast furnace will be repeat blast furnace of the existing blast furnace. So we have the engineering available. We know from where, what is to be sourced. We know what we can produce in India and what we can produce in-house in JSPL? Similarly, the DRI plant, we can make here, because we built our previous DRI plant also here. Then to build the previous DRI plant, we had to build a coal gasification unit also. And at this time, we are going to use at least 60% to 70% of our gas to produce DRI. We have already tried out, and we are now using 50% gas and 50% gas in our existing DRI plant. So this is the reason, we do not need any coal gasification. So that means we do not need any washery, and we do not need so much of big coal gas defining system, which will definitely reduce the cost.Your next point for the electric car from this, it is very valid point. Yes, you are right. We already have India's largest electric car furnace today working in Angul. We have 3 more pharmacies working in Raigarh, where we want to increase the capacities from 110 to 130 tonnes. And that is also under progress. And our aim is to produce at least 50% of steel through electric car furnace route. And in the region, we want to put up a pellet plant, followed by a DRI plant and followed by the -- another electric car furnace. So another area where we can lose our DRI, that is in converter shops. So converter shop provide -- people don't use HBI or DRI. We are the first company in the world who has commercially used DRI in the world. We are using today 12% to 15% of DRI in DRI shop, that is converter shop, which is unheard by many in the world. This is the reason. And because we do not need any additional coal or coke or electricity, just we need a hot metal and a little oxygen to bring the temperature to that level of 1,600 degree and DRI into it. So DRI is produced through a very environmental-friendly route. And to melt DRI and to convert into steel through the converter is much more beneficial in terms of reduction in CO2 than even the electric car furnace. So these are the areas where we are working. There are so many research and development going on in the company, which I cannot share everything in this firm. But if anybody is interested in talking one-to-one, we can definitely share. And when you visit our plant in Angul, you'll be happy to witness all those things, what we are talking today. Hope I answered your questions?

[Nishant Baranwal, Head of Investor Relations]

Sir, I know we despite the extended time. I know there's a long queue. And I think there is 1 personal question that's coming forth to me is regarding the spreads after the third quarter -- after the last quarter. And so where we are right now on quarter-on-quarter change in spreads? And what are we looking at? If you could take that in your final commentary, sir?

[Vidya Rattan Sharma, MD & Additional Executive Director]

Yes, Nishant. May I? Can I continue?

[Nishant Baranwal, Head of Investor Relations]

Proceed. Proceed.

[Vidya Rattan Sharma, MD & Additional Executive Director]

Yes. So ladies and gentlemen, and first of all, I thank you for the patient hearing. Today is a Eid already. So I also wish you on behalf of our company and on behalf of our Honorable Chairman, wish you a very Eid Mubarak, happy Eid. Eid is a festival in the country where the more than 25 crore people they celebrate and we all celebrate with them like we celebrate Diwali and Holi. So it is a symbolic message, which gives harmony, and we also pray to God, almighty, to eliminate this coronavirus from our country so that the country remains healthy and can meet out the expectations of the people. Now coming back on the spreads from Q4 versus Q1 and then in this particular year. You see we all our professionals, and we enjoy making steel and we enjoy to be in the business of steel. Anybody, whether he or she, when you reach to a particular point, then there is no U-turn in life. So we believe in this theory that there is no U-turn. And no U-turn means whatever we produced in quarter 4, we have to produce better than quarter 4 and quarter 1. The prices, they will vary. Sometimes, we get better margins, better EBITDA, sometimes lower margins, lower EBITDA. But the sustainable EBITDA and sustainable margins are always our focus. And if you get something additional, that is a bonus and one should always enjoy that bonus during a rally time. So the point here is we cannot take a U-turn. And number two, we cannot think for any kind of threat which can hamper or jeopardize our business. So we have all the Tier 1, Tier 2, Tier 3 planning. What happens if the pandemic spreads further? What happens if the domestic demand becomes lean? What happens in the domestic industry is struggling for the survival? All these things we have charted out our plan. And those are very, very meticulous plan. This is what we've shown to the industry and to the country last year. And during pandemic time, we have shown such kind of results -- splendid results where our investors, our management, our people working in the organization and the stakeholders, they are very happy, they are and they are reward to -- by way of the stock prices reaching to INR 500. I believe in the management, believe in Mr. Jindal -- Mr. Naveen Jindal and his family. They have 200 years of experience in scale. The 4 brothers and all of the relatives, they're in the steel business. And I'm sure, country is in say hands. Company is also in safe hands. So we also believe that Prime Minister, Mr. Narendra Modi, he is the best manager to manage these disasters in the world. So I think this disaster today, what the country is passing through, I mean none other than Mr. Modi can handle in a better way what he can do. We have to support Mr. Modi, we have to support our government, and we have to support the steel. And let us wish that this particular year will bring more cheers on our face, and we all will be doing much better. So trust in Naveen Jindal, trust in our management, trust in our company and trust in the nation, then only we can build a country of our dreams. So I hope -- thank you very much, once again, and Namaskar.

[Nishant Baranwal, Head of Investor Relations]

Thank you, sir. So I'd like to thank from JSPL team, IIFL for organizing this call and all of you for attaining the call. As always, we'll continue performing and Eid Mubarak today. Thank you. Operator, over to you?

[Operator]

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