Jindal Steel And Power Ltd

NSE:JINDALSTEL

Earnings Call Transcript 2022-Q4

[Operator]

Ladies and gentlemen, good day, and welcome to the Jindal Steel & Power Limited Q4 FY '22 Earnings Conference Call hosted by JM Financial. [Operator Instructions] Please note that this conference is being recorded.

I now hand the conference over to Mr. Ashutosh Somani from JM Financial. Thank you, and over to you, sir.

[Ashutosh Somani, analyst]

Thanks, operator. Good afternoon, ladies and gentlemen. Thank you for dialing into JSPL 4Q FY '22 earnings call hosted by JM Financial. We have with us the top management of JSPL to discuss the results.

I will now hand over the call to Mr. Nishant Baranwal to do the introductions and to take it forward. Over to you, Nishant.

[Nishant Baranwal, executive]

Thanks, Ashutosh, and thanks, [ Sasan ]. Good day, everybody. Thank you, everybody, for joining us for this conference call to discuss our 4Q FY '22 and FY '22 results.

Today, from our management side, we have with us our MD, Mr. V. R. Sharma. Also, we are pleased to inform you that we also have with us our CFO, Mr. Ramkumar Ramaswamy, on this call.

Before going further, we'll request our CFO to say a few words.

[Ramkumar Ramaswamy, executive]

Thank you, Nishant, and good day to everybody on the call, and a warm welcome to our conference call. This is Ramkumar here. I'm a chartered accountant with 25-plus years of experience across different organizations in different industries. I'm really pleased to be joining JSPL and working with them for delivering the future growth and profitability agenda. Thank you, Nishant.

[Nishant Baranwal, executive]

Also just to add, just to give you a brief on, Mr. Ramaswamy. Mr. Ramaswamy has worked with Vedanta, Shell, Cadbury and such companies before joining us. And so he brings with him a wealth of experience to JSP.

Going further, we have with us our MD, Mr. V. R. Sharma, and I would request him for his opening remarks. Sir?

[Vidya Sharma, executive]

Yes. Good afternoon, ladies and gentlemen. Welcome to this investor dialogues interaction and meet. We have done a wonderful job in the last year. If you see the last 3 years of our score card right from getting into red list to black, and from BBB- to AA-. So we have covered a great journey with the cooperation of everybody present here. And those who are not present, they have also contributed a lot in the overall growth of the company.

We started with 5.5 million tonne in 2019 and 6.3 million tonne of production and 7.2 million tonne production, 7.6 million tonne production and now 8 million tonne production. So we have done 8 million tonne last year. Whatever we promised to the street and to our lenders, financial institutions and to our shareholders, we have fulfilled. We took a target of 15, 15, 50 and 8 million. That was INR 15,000 crore and above should be the EBITDA, INR 15,000 crore and below should debt level and more than INR 50,000 crores should be the overall revenues and 8 million tonnes should be our production.

So with the support of everyone, by the grace of God, we could achieve all these figures. And in some of the figures, we are much ahead of the expectations, and we have exceeded the expectation.

Like the debt levels, they have come down to a level of -- into 4 figures that is INR 8,500 crores. Now on 30th May, this has come down to less than INR 6,000 crores. So we are aiming to make the company to net debt 0 within this financial year. And then we have overseas with NSR about only $120 million. This will also be done and then we'll be will not have any obligation in the overseas investments also.

All of the overseas investments in South Africa, Australia and Mozambique. They are doing extremely well. They are earning positive EBITDA there and supporting the mother company JFC, and they're supplying the coking coal, anthracite coal and also [ medium-val coal ] to our company in India. We are also selling outside -- to the outside world as per the business economics.

Now coming back on the last year, INR 15,000 crores EBITDA, we achieved. And INR 56,000 crores of sales turnover, we achieved. We did 7.64 million tonne of sales. If you see the overall average EBITDA in the year, we already achieved to a level of about INR 19,800 per tonne. That is simple mathematics dividing the overall EBITDA by the overall sales.

So we -- there was some problem in last couple of months. We faced some issues in terms of high input cost prices and some of the one-offs that we have done, and that's why you might be seeing the EBITDA level in quarter 4 is reflected lower, but in fact, -- it is not lowered instead of adjusting the books in all 4 quarters our auditors, they did it in 1 quarter only, and we accepted their recommendations, and that's why you are seeing some pressure on the balance sheet of the quarter 4, which is actually not there and we are very comfortable.

Now coming back on the current situation and the geopolitical situation in the world, -- sorry, Ukraine and Russia war is still going on. And we do not know how long will it continue. And in such a situation, we are thinking that the market for the Indian steel products will always be there, and we will be in a position to export as much as possible.

We did last year, 2.56 million tonne of exports. This year also we will do a similar amount of exports, about 2.5 million tonne plus. So last year, it was about 33%, the total sales, which will be this year, maybe 30% or 31%. We'll try to achieve the same number that we did last year, maybe 2.6 million tonne, 2.65 million tonne.

Now here the question, the general questions are what about the export duty? So we have put up our people on the job, the complete product development people, our R&D people to find out those products in the market where the value addition is very high and where the customers will be willing to pay us this 15% or a little less. So I think this is going on, and we are working very seriously on this.

Hopefully, in the next 2 to 3 weeks' time, we'll develop all those grades which are required in the international market, and those are 2 value-added grades where we can enjoy the market through value addition and value engineering exercises. So this is going on. Some of the products, fortunately are not in the list of export duty, where the goods are surplus in the country or goods are not required by the MSMEs or by the automotive industry.

For example, the welded structure, it is an unique product, we are the largest producer of welded structure in the country. So we are going to export lot of welded structure then we are going to export head hardened rails, grade 1080, 1175 and also the rails at 350 grade that is used in Europe or say R260. So these are not covered under the export tax or export duty. So similarly, specialty high-alloy round steel bars -- round steel billets are not covered under that. So we have good market internationally.

So we feel that out of 2.5 million tonnes at least 2 million plus will be duty-free and balance by 500,000 will be covered under duty, but those products will produce in 500,000 tonnes, which are very high value-added product where paying between 15% duty by a customer will not be a problem.

The other good thing for the exporter as a whole is we are -- when we discussed the orders in the month of February or beginning of March, these orders were at INR 74 or INR 74.50 per dollar, and today it is INR 77.5. So there is a net gain of INR 3 for the exporters in India, especially to JSPL also and with INR 3 the average price of selling price is $800. So immediately INR 2,400 comes to the company. And that is giving a lot of respite to the exporters in terms of exporting the goods.

The other area is at least $50 to $55 per tonne decrease in the prices in terms of the iron ore prices and pellet prices because -- we are thankful to Government of India, they imposed duty on export of iron ore and also export on pellets. So it's a good sign, and they also reduced the duty on many of the ferroalloys, nickel and also on some of the duty reduction on coking coal. So put together this effect is about $60. So that is about INR 4,500 and INR 3,000 -- INR 2,400 we get from currency exchange rates. So net to net, we are covered by INR 7,300 to INR 7,400, it's close to $90 per tonne. And that takes care of our export tax in case we had to pay.

And wherever there is a known payment of export duty in those areas, that is a benefit, and that will nullify the effect of export duty on some of the products but we are interested only in exporting those goods which are not required by MSMEs in the country and which are not required by the automotive industries.

Fortunately, today, in our portfolio, we do not have the goods like hot rolled coils or galvanized material or color coated or Galvalume or the roofing sheets. That is not our business. So we are not in this business as of now. Maybe in the future, we will. But today, we are free from this business. So our business is affected least in terms of export duty maybe. And we are getting the benefit of our different product mix, which is very unique, right, from structurals to welded structure, to rails, to wire rods and also plates and coils of the special grades.

So these are the areas where we can get the benefit, and we will -- we will try to nullify the impact of duty, either by way of the points I explained or by getting the additional price for the specialty products, which are now developing. Our R&D team and our production team are working very strongly, very hardly in the last 4 weeks' time. And we are now working, maybe in the next 2 to 3 weeks' time, we'll cover it.

So in a nutshell, the company is doing extremely well. The way forward is, we have already initiated the CapEx. So we are at a point where there's no U-turn, in taking U-turn in the CapEx business. So we have already taken an exposure of about INR 7,000 crore, most of the clearances from the Government of India and the state governments are already obtained. So the civil work has started in many of the areas and in balance areas, the civil work is yet to be started. Hopefully, by the end of this year, we'll be in full peak of the construction.

We have planned to cover the entire product line, the entire expenses by March 2024 as declared by our Finance Minister that the scheme for corporate tax rebates from 25% to 15% has been extended up to 2024 March. And we are hopeful that we'll commission our plant by March 2024. So in the balance sheet for '25, '26, we should be a 15 million tonne company and heading towards a bigger journey. Country as a whole is going to produce 300 million tonne of steel. The present measures taken by Government of India, we appreciate their concern. They have reduced the duties on many of the products. They have also imposed duty on the exports. We appreciate their concern.

And we feel that these are temporary measures any government would like to take it in the interest of the nation. And we and JSP, we have taken a pledge that the product -- the only single product, which we are -- which is required by MSMEs in our company, what we produce that is wire rods and these wire rods, we'll not be exporting in the interest of nation. So this is what the total overall picture is.

As far as the CapEx is concerned, as I told you, INR 18,000 crore is the CapEx, what we envisaged. We are online, and there won't be any delay. And we will be completing our projects on time and this is going to be the total scenario. We are hopeful that we'll be exceeding our expectations in times to come. And hopefully, the company will always show the glitterness in market as well in true sense in the overall steel business on the origin of the country.

So thank you very much. In case of any questions, you are welcome. All of us are sitting here, we are here to reply you. Thank you.

[Nishant Baranwal, executive]

Thank you, sir. Before we move on to questions, before the call, we have got certain common questions, which we believe we'll take it up, so that a lot of those questions of a lot of you people would be answered.

Let me just start with the first one. The first one is regarding the EBITDA movement Q-on-Q. While I understand that you are seeing around about to INR 3,750 per tonne movement on the EBITDA. I would just like to throw some light on the moving parts.

So in that EBITDA movement, there is INR 300 crore one-off. It is a noncash item, which is there -- which you can point out.

The other there, on the coking coal front, the quarter-on-quarter movement has been close to $60 per tonne of coking coal. While iron ore has remained flat, the cost has increased on account of thermal coal and ferroalloys to the extent of INR 1,000 per tonne.

At the same time, we have been -- we have got benefit of NSR going up to the tune of around about INR 800 per tonne. And because the volumes were up, we have been able to get an efficiency in for around about INR 1,000 per tonne. I hope that gives you the EBITDA movement across.

Another question that has come up is the Q-o-Q decline in terms of the EBITDA in foreign geography that is Australia. So one of the things that we have noted in our press release also and I would want to point out here that while the production was higher in Australia due to the storm as well as some problem with the dispatches, the dispatches have been lower. And therefore, the net earnings has been lower.

Also, there is a $2.5 million one-off stock impairment charge, which is there in the Australian operations, EBITDA, which you are seeing.

So these are 2 items.

[Vidya Sharma, executive]

Sorry, over and above, we were maintaining the stock of about 600,000 tonnes that is 6 lakh tonne in the plant and ports. Because of the movement of coal by Government of India from mines to different power plants in the country, so we were unable to get the rails on time, and that's the reason that this 600,000 tonnes could not be sold. Had it been sold, then you would have seen different numbers altogether.

And the another point I'd like to mention here so that in case of any question, you may raise later. So yesterday, Government of China, they have declared the withdrawal of rebate. They used to pay 13% exports incentives to the steel industry. They have withdrawn yesterday, and that has given a signal to the world that the steel industry in China will have to be at their own. And they have -- they will not have any support from government -- from federal government of China in terms of giving them the export incentives.

So that will stabilize the whole market in the inflation world. And today, the good news is that, today morning, Mr. Xi Jinping and his government, they have declared that from 1st of June, the Shanghai is being open. So the Shanghai is being open means from tomorrow, that means a lot to the world, a reason being because most of the user industry, most of the component manufacturing industry, they are located in and around Shanghai, especially up to WuXi. So WuXi is the place, which is recently under strict lockdown. And I think now after the lockdown is lifted, the domestic consumption of steel in China will increase and the Chinese team, Chinese people would not look outside other than their own consumption. So the international steel market will stabilize and India stands a great chance in filling up the blanks wherever the gaps are.

Yes, of course, we have taken a decision, as I told you, that any product, which can affect adversely the availability of the local steel that we will not export. 2 products here, one is wire rods, other is the rebars. At construction bars, we have taken a decision at our own, we'll not be exporting any construction bar because that impacts the government projects and it will also impact the general house builders. So we will not export any rebars and we'll not export wire rods. So this is voluntarily and this is our self-regulated decision, and this will continue. Okay, please.

[Nishant Baranwal, executive]

Just the last question which has come is regarding the Mozambique EBITDA. You'd be pleased to know that we have been increasing and ramping the production in Mozambique. While the EBITDA reported numbers around about $12.3 million. It does take into account a negative charge of around about $14 million on account of foreign exchange for the loan, which was repaid by it. So therefore, that is not -- the EBITDA being reported does not reflect the good performance by Mozambique. So those were the questions which we have got.

Operator, now we pass on to you, and then let's take the questions. One request is that please limit your questions to strategic questions. We at IR team here can always help you with the data questions.

[Vidya Sharma, executive]

Yes, the questions you might have got answers of many of the questions what you have listened from our side, Nishant and me both explained everything. But in case still is there some doubts or some questions there, please, you are welcome.

[Nishant Baranwal, executive]

Operator?

[Operator]

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

[Amit Dixit, analyst]

I have one question on...

[Operator]

Mr. Dixit, sorry to interrupt you. The audio is not clear from your line. Please use the handset.

[Amit Dixit, analyst]

Yes. Is it clear now? Yes, so first question is with respect to the arrangement s you're contemplating with GIFLO Steel of Hungary for supplying steel products [indiscernible]. So just wanted to understand when will you be able to supply? What was the approval process? And when should we expect and whether it is more an export-oriented unit or something...

[Vidya Sharma, executive]

So this is the rail wheelset business. We are working on rail downstream business for a long. As you know, Government of India is going to add more and more tracks, more and more rolling stock. You might have seen the news about 15 days back, the Railway Minister declared that they have ordered about 30,000 wheelsets from China.

So there is a big gap today in India. We are looking for the right technology, and that is called forging rail wheels in 800-millimeter and 1,020-millimeter diameter especially for goods train as well as high-speed trains. Since many of the high-speed trains are coming in the country under the tagline of Vande Bharat and also the bullet trains. So we are looking the future and we are discovering a future in this particular product.

As far as the approvals accruals are concerned, the Government of India has a straight policy. You produce and you come for the approval. So no customer will give the approval first and then we have to go for the manufacturing. So what we will do, we will -- we are now working to put up this plant in Raigarh. And this will be a downstream product or you can say, forward integration of our steelmaking.

We are not going to add any steel capacity for that, but we will be doing forging and we'll be making wheels for Indian Railway as well as for private rail manufacturers in the country and also for exports, so wherever it is possible. So we are going with a very humble beginning of 25,000 sets per year, that is only 2,000 sets a month and it's a very small plant and but it is going to be very prestigious. So we are working with the latest state-of-the-art technology from Europe. And GIFLO is going to help us in this business.

[Amit Dixit, analyst]

Okay. And sir, the second question is on coking coal cost, while Nishant had [ spoken on ] the cost increase in this quarter. Can you guide us what would be the cost increase in Q1 FY '23?

[Vidya Sharma, executive]

You see, the das are, of course, you all are very learned people. So you have all the das available time to time, but I will tell you, let us take a journey of about 14 months. So 14 months right -- 14 months from now before now or 14 months ago, so we were at a level of $105 a tonne FOB Australia. That is a benchmark and from where the indexes start. And then the journey started from $105 to $200, $260, $300, $350, $400, $480 for a long time, then $550, $600. And for about 3 weeks, it was $675. So we reached $675.

Now the point here is how to buy and why not to buy and when to buy so these are the areas. So all steel mills in the world. They keep on buying because otherwise, one day, they'll go dry. We cannot stop the blast furnaces. So we could keep on buying and we keep on doing the averaging. So you've been the investor, you know very well. So this is SIP. So the SIP business is very well understood by everybody that we invested in SIP. We keep them buying every month. So similarly, we keep on buying the coking coal every month.

So the impact of the coking coal that comes all of a sudden, when the market is at its peak, and it remains for about 2 to 3 months at the same level.

So unfortunately, from $520 to $675 this stage was from November end to February. And that has come in the business that impacted the business, not only for us, for everybody in the month of -- end of February and March and also partly April. So that was the story. But all of a sudden from $675 the market came down to as low as $385.

We also bought at $385. And then again, it started moving up, $385 to $450, $480, $520. So it remained stable for 5 weeks. At $510 to $520. And now it has come down in last [ 10 day's ] time from $510 to $455 to $460 a tonne.

So this is the total price or you can say the total charge of the coking coal in the international market. So what is happening now?

Now the prices are at about $460, $465 per tonne FOB. And some of the Russian coal has also started moving in, which is cheaper. That is $50 to $70 per tonne. So there's a little pressure on the international energy businesses. And the worldwide, the coking coal prices may either remain a little moderate level or maybe at the same level in times to come.

So we have positioned ourselves in a way that we are buying PCI coal and some of the anthracite coal from Russia. And we are buying majority coking coal from our own mines in Australia, South Africa and Mozambique.

If we need, we will increase our production in South Africa and Mozambique and also in Australia, and we fulfill our requirement. So this is what we are aiming. So we are -- I would say we are pretty insulated from the topsy-turvy behavior of the market in times to come. Hope I answered your question.

[Operator]

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

[Sumangal Nevatia, analyst]

First question is on the captive coal block. So if you could just guide where are we as far as development of the coal blocks is concerned, and when do we expect commercial production? And what is the potential costing sitting on that?

[Vidya Sharma, executive]

First of all, I'd like to thank Government of India for their very liberal approach in doing the privatization of the coal mines. And that is the need of the day. Last 8 years, it was a big problem. The new coal mines were hardly opened. So most of big mines were owned by CIL Coal India Limited and their subsidiaries. And the energy cost, energy prices, requirement of energy was increasing at a rate of 15% to 20% Y-o-Y basis. So now Government of India felt the necessity that we should now liberalize the coal mines, and they should be privatized.

As you all know that our coal mines were canceled by Honorable Supreme Court in 2014, and now thanks to Government of India, our whatever mines got canceled, so we have got those mines also, and we have got -- in addition to those mines also.

So now we have 4 mines available in our hold. All these 4 mines, we are thankful to government that they have considered us as H1 winners, H1. So we have won these mines. And now the process is going on. We are talking to the ministry, and hopefully, in next 1, 1.5 year time, we'll be in a position to start production in all the 4 mines and that will definitely bring a different cheer to the organization.

And the major cheer will be in the sense of how to reduce the CO2. That is carbon dioxide emission. So today, the Indian steel industry, through the blast furnaces route, they emit at least 2.6 tonne of CO2 per tonne of making steel. But if we route it through coal gasification, and electric arc furnaces, then we can do it, averaging if we do 50% electric arc furnaces, 50% blast furnaces. Then we can average it out to about 1.8% or maybe lower, maybe 1.7 tonne of CO2 per tonne of making steel.

So perhaps we are very first company in the country and perhaps in the world, where we will be generating or producing steel 50% through blast furnaces and 50% through the electric arc furnaces. There are no example in the world today that the companies, those who have blast furnaces, they also use [ CPR ]. So we are the only company today. Today, our ratio is 40-60. 40% through the electric arc furnaces, 60% through the blast furnaces.

In times to come, we are going to add 2 more gasifiers one in Raigarh and one in Angul, repeat of the Angul one. And this will be done the moment the coal is available through our own mines.

And the another area is, we are thankful to Prime Minister. We are thankful to Mrs. Nirmala Sitaraman, our Finance Minister, and also coal ministry, that they have declared that there will be a 50% discount on coal being used for the coal gasification. So this will change the fate of the company. Today, if you see in America, America used to be a surplus gas country, where the gas is at $9 per MMBtu. In Europe, it is $35 per MMBtu and in India, the gas is $25 to $35 per MMBtu is the spot market. And we are going to get gas at price of about $3 per MMBtu the day we have our own coal mines.

So this is going to change the entire scenario. The cost of production is 50% DRI, 50% of hot metal through blast furnaces, the cost production will come down at least INR 4,000 a tonne.

So I think that impact you will see in the balance sheet of '23, '24 and not '22, '23 because we are going to start our coal mine next year, and that will change the company and will bring the company to a different league. We'll be producing blue hydrogen also out of that. And this blue hydrogen will be used to pump into blast furnaces up to 15% to 20%, wherein we will reduce the coking coal consumption by 20%.

So already, these trials are taken by MMK and SeverStal and 1 more build in Russia and 1 plant, 1 blast furnace in Europe. So this is a proven technology, you have to inject syngas, that is synthesis gas into blast furnaces in order to reduce the overall CO2 footprint.

We're also pleased to inform you that we are the largest company today in India capturing CO2. We are capturing every day, 2,000 tonnes of carbon dioxide. Unfortunately, today, we do not have the customers for that. We have requested Government of India to please put a hub, the CO2 consumption have been in Angul or in Paradip then transport the CO2 through the pipeline.

The Honorable Steel Minister, he has visited us in 28th of May -- 28th April last month. And he has promised that he will definitely work on this, that we will either putting up a CO2 consumption hub in Angul or in Paradip. If it happens, then this will also change the fate of the company. We will be the largest steel company in the world. Please mark my words.

We'll be the largest steel company in the world in terms of capturing the CO2. Our aim is to capture at least 5,000 tonnes CO2 per day. And there are numerous products what you can make, be it soda ash, be it urea, be it many other chemicals including methanol from CO2. We are working very seriously in introducing the ESG concerns, and we are addressing these areas in a much bigger way as a responsible company.

You'll love to have these products in time to come. And these declarations, what I'm doing today at 50% steel from electric arc furnace route and 50% from blast furnace route and reducing 15% coking coal requirement through the syngas injection will be a milestone in the country and also in the world.

[Sumangal Nevatia, analyst]

Just beg your pardon, sir, I just want this 15 million tonnes of volume capacity which we have on the captive coal block, what is your guidance for per se, FY '24 and '25, how much we'll be producing in '24 and '25?

[Vidya Sharma, executive]

So your question is how much coal we'll be producing or steel we'll be producing?

[Sumangal Nevatia, analyst]

No, captive coal. Coal, sir.

[Vidya Sharma, executive]

See, as I told you, we have 4 mines now. And all these 4 mines, at least 2 mines will be fully operational. We can do at least 6 million to 7 million tonne coal from these mines every year. There is no problem. So total 12 million to 15 million coal will be taken out from these mines.

[Sumangal Nevatia, analyst]

In '24, FY '24?

[Vidya Sharma, executive]

Yes, '24, '25.

[Sumangal Nevatia, analyst]

Okay. Okay. Sir, just second question on the previous question on coking coal, we got a very detailed background from you. But just in terms of numbers, given that we have a decent inventory, we have captive coking coal production as well. So in 1Q, any thoughts what would be the quarter-on-quarter increase in cost? And secondly, given the current situation of export duty and prices, what is your sense of NSR movement in 1Q over 4Q?

[Vidya Sharma, executive]

You see, the NSR has already come to bottom. This is my view. And with the China coming in at full swing and the lockdown is being lifted, export duties are removed the war is still going on. We are expecting a great business from Ukraine in times to come because Ukraine is to be rebuilt the day the war stops. So they used to supply about 35 million-- they used to produce about 35 million to 40 million tonne steel a year. So this steel will have to be replenished by somebody. Europe is not in a position to do it. America is not in a position to do it. Russia will have a restrained relations. So hopefully, Ukrainian will not buy from Russia. So there are only 2 countries left in the world, either Iran or India. .

So Iran is under sanction. So I think India stands great chance to supply to Ukraine. As far as the export duties are concerned, these are -- as I told you, these are negligible. Having negligible effect because, as I told you earlier, that at least INR 7,000, we are getting from cost reductions as well as from currency exchange rate and the balance -- the products what we are going to produce will be those products where the value addition is very high, and the customer will be willing to pay additional price.

So we'll not be in commodity market or the general steel market where the prices are low and over and above, we pay 15% duty, we cannot afford. So this is what the business plan we have taken. And as I told you, we are not in commodity hot rolled coils or galvanized materials. So we are least affected from this duty imposition.

[Sumangal Nevatia, analyst]

Sir just to get your message right. You said your prices have bottomed. So I just want to know what is that bottom level, what you're talking about that we'll see in 1Q versus what we have already reported in the fourth quarter, yes.

[Vidya Sharma, executive]

You see, nobody can predict the market. The markets are always market even. As I told you, we are thankful to Government of India for imposing duty on export of pellets and export of iron ore. Nobody was knowing before 21st of last month, 21st of May, I would say. So it is imposed now. When it is imposed, then all of the sudden prices have come down. So when the prices have come down, the total economics have changed. It does not mean that the profitability has gone down.

Yes, temporarily, yes, because the stocks in pipeline and also these stocks lying in the plant, they are of high value. And by the time the new price stocks, they do come to the plant, and then everything is done. So it takes some time. So I cannot say that what is the absolute number today.

Tomorrow, if this is iron ore prices go down under INR 2,000. The impact will be more than INR 3,000 in the steel prices, but that does not necessarily mean that, that will be a loss of realization, it is not. So I think we should be happy that the country is stable. The demand is stable. Market is stable. Whatever the input cost decrease will take place, we'll pass on to the customer as a customer-friendly organization. And if there is an increase, yes, definitely, that will also be passed on.

[Operator]

The next question is from the line of Kirtan Mehta from BOB Capital Markets.

[Kirtan Mehta, analyst]

You have sort of in the initial questions explained the EBITDA movement quarter-on-quarter. Would you be also be able to sort of explain us how the net debt reduction has been achieved during the Q4 and FY '22? And how do you plan to reach to 0 net debt status over FY '23?

[Vidya Sharma, executive]

Nishant will reply you.

[Nishant Baranwal, executive]

So our CFO, Mr. Ramkumar Ramaswamy.

[Ramkumar Ramaswamy, executive]

Okay. So from an inflow perspective, I think we've had an inflow of around INR 5,400 crores, yes. And what were the primary drivers for this? There was working capital release of around INR 900 crores. Tax refund of around INR 500 crores, and of course, from an EBITDA perspective, we had INR 2,800 crores and export prepayment of INR 1,150 crores, yes. So these are our primary inflows.

From an outflow perspective, we had ESOPs and dividends of around INR 600 crores. Tax expenses of around INR 500 crores, interest of INR 229 crores, CapEx of around INR 800 crores and loans of around INR 2,800 crores. So I think that's a broad summary of cash flows.

[Nishant Baranwal, executive]

Kirtan, I hope that answers your question.

[Kirtan Mehta, analyst]

Yes. Would you be also sort of lay down a path to achieving a net 0 status. So how do you see the cash flow that will help us go down to the 0 status from here?

[Ramkumar Ramaswamy, executive]

That's purely from a business performance perspective, we expect to have a good performance this year, and we're going to use the cash that we generate out of the EBITDA to really repay our debts. As our MD said before, we expect to be net debt free by the end of this year. I mean that's the ambition that we're working on.

[Kirtan Mehta, analyst]

Right. And the debt number that we currently are indicating as of 31st May, is it after receiving the INR 3,000 crores of dues from the sale of -- cash from the sale of power business? Or that would be an addition to the -- that could also sort of support the reduction coming through?

[Nishant Baranwal, executive]

So Kirtan, we would not want to comment on the 31st May number because it is not audited. And therefore, we would stick to our 31st March number, which we have already said, close to INR 8,500 crores. It was INR 800 crores that we have already published. So we would want to stick to that number. But yes, there has been a INR 3,015 crore of cash consideration, which has come in as inflow into the company on consummation of the transaction.

[Kirtan Mehta, analyst]

Right, sir. And one more update in terms of the Kasia mine production. How is the production ramp-up going on? Is the target for -- target of 5 million tonne of production for Kasia mine still achievable for the year or would you be able a better it?

[Vidya Sharma, executive]

We are on the line, and we will achieve 5 million tonne as per our -- the permission obtained by us.

[Operator]

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

[Pallav Agarwal, analyst]

I had a question on our pellet expansion. So now that your exports are probably unviable. So would we think of deferring this pellet plant to come in sync with other hot metal expansion or we will go ahead with the pellet plant expansion right now?

[Vidya Sharma, executive]

Yes, please. I'll tell you. First of all, as I told you that the government policies imposed all of a sudden, that does not change the ongoing work because we know that the government policies are and basically designed, drafted, implemented in the interest of country and in the interest of mankind. But we don't have to worry about it, because these are the temporary measures taken by any government in the world, but we have to see what Prime Minister has told today morning is -- you must have seen in all the newspapers.

That post-COVID, India is the fastest-growing economy in the world.

So with 300 million-tonne of [ steel ] with $5 trillion of economies, with $1 trillion of exports, the government cannot go wrong. But yes, there was a need at that time that how to support the common people. And we appreciate that action taken by Government of India.

And now coming here to your specific question on the pellets. First of all, the INR 18,000 crores of project what we have [ early said ], it is already under implementation. As I told you, we are at a level of no U-turn, come what may. So we have to do it.

So in a way, it is good that during this advanced time or during this ambiguity, we will complete our projects. By the time the projects are on, we will be ready with the product. And we are not putting the pellet plant for exports because this plant is coming in the heart of plant Angul plant. So Angul plant, when we are bringing the iron ore through 3 pipelines from Barbil or Keonjhar or from Kasia mines tomorrow, and bringing to Angul through the pipeline, through the slurry pipeline, there's no point exporting this particular product from Angul, to again, to Paradip or Vizag or Gopalpur.

So we will be using this product within the company. As you know, that we are going to increase plant capacity from existing 5.4 million tonne to 12 million tonne. So for 12 million tonnes, the material requirement -- the raw material requirement is going to also be doubled from 5.4 to 12 more than double. So we'll be requiring pellets for our internal consumption.

The last 3, 4 months, we are not sold, we have not exported any pellet in the interest of [indiscernible]. So we are consuming pellets within the company. So this new pellet plant will also be consumed -- the produce of this plant within the organization. So I hope I answered you.

[Pallav Agarwal, analyst]

Yes, sir. Sir, also, I mean if we just -- I think I missed the volume guidance for next year. And basically any particular segment that you see you will drive this increase in our volumes?

[Vidya Sharma, executive]

You see, first of all, this -- last year, we did 8 million tonne and we sold 7.6 million tonne. We had some stocks left over in the plant and port because we could not get the right logistics port. That was the reason, and that's why you are seeing the impact on the Q4 also is one of the impact.

The other area is the production. We are -- we had a consent to produce only up to 8 million tonne. Last year, we got the consent extended to 9 million tonne. And this year, we are planning that we'll be doing at least about 8.5 million, 8.6 million tonne of production and 8.2 million tonne of sales. So this is what our planning and we are online, we'll be in a position to do it. Hopefully, things will be much better in times to come.

[Operator]

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

[Bhavin Chheda, analyst]

First of all, a very good presentation overall, which gives a lot of data from the presentation itself. Just a few questions from...

[Operator]

Sorry to interrupt you Mr. Chheda, please increase the volume of your device.

[Bhavin Chheda, analyst]

Yes. Now it is clear?

[Operator]

Yes, sir. Please go ahead.

[Vidya Sharma, executive]

Yes, it is clear. Please go ahead.

[Bhavin Chheda, analyst]

Sir, on the opening remarks, you said some export incentives have been removed. I understand that has happened 12 months back. Are you -- is there any new thing which has happened in the China or on a certain product category?

[Vidya Sharma, executive]

Yes, it is a new thing. Day before yesterday, the government has taken the decision.

[Bhavin Chheda, analyst]

So these are on which product categories?

[Vidya Sharma, executive]

There is a list of various products. I can share with you. Nishant will share with you.

[Bhavin Chheda, analyst]

Okay. So this is over and above which happened a year back, where the all export rebate incentives were removed on majority of the products...

[Vidya Sharma, executive]

I will share both the list with you. The earlier list and the exclusions in that list, those are covered now.

[Bhavin Chheda, analyst]

Okay. So this benefits you and some products which have been included in list yesterday, JSPL makes that product?

[Vidya Sharma, executive]

Yes, we are, as I told you, first of all, this will stabilized the international markets. Secondly, they cannot export to any country where the local industry is very competitive. And the third is the overall sentiments -- the worldwide sentiment, they do change with that kind of corporate -- the government decisions.

[Bhavin Chheda, analyst]

Sure. Sir, my second question was on -- earlier on the media interview, you were looking at EBITDA of roughly INR 18,000-odd crores in FY '23 on volume guidance, which you have given close to 8.5. So which works out to more than INR 20,000 a tonne, where the steel prices in India have been falling plus this incremental export tax. So where will that incremental EBITDA you think can come from, what kind of cost initiatives you think? What are the possible cost savings?

[Vidya Sharma, executive]

You see. I will tell you. You see there are certain things which are always behind the curtain in terms of the strategies. So we can only reveal you a part of that. But we have a complete list that how to achieve the better numbers in times to come. So we are in a competition -- we are in competition, not only with the Indian companies, but we are in a competition with the world. So we have to have a certain secrets, which we cannot reveal today. But yes...

Hello, can you hear me?

[Operator]

Yes, sir. Please go ahead.

[Vidya Sharma, executive]

We have certain strategies, products, how to position ourselves in the international market and how to position ourselves in the domestic market. So those things you will know time to time. When we meet after 3 months after the -- in the next investors meet, then you will get part of that. This is nano part of that. And then you will get much bigger fragrance after the third quarter because that will give you a much bigger clear picture that how JSPL is different than others. So we will come back to you and -- but we assure you that you have invested in the right company and we'll not let down you.

[Operator]

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

[Kamlesh Bagmar, analyst]

One question on the part of, like, say, last quarter's guidance of around INR 20,000-odd per tonne, even if I take INR 300 crore of one-time, so EBITDA comes at INR 15,000. So like I'm really amazed to tell that like from our guidance of INR 20,000, we stuck at INR 15,000, and that guidance was at the fag end of the February. So by that time, we were well aware of the cost, like say, we have been mentioning that we have -- we are carrying inventory for 3, 3.5 months much higher than the industry average. So what happened in this particular quarter?

[Vidya Sharma, executive]

I will tell you. Yes, you are right. We discussed in the last meeting. And first of all, maybe some confusion. I must correct myself and yourself. If you are right, then I'm correcting myself. My point of view is that the average EBITDA for the year, what it should be. So the last year, with a simple mathematics I'm telling is INR 15,000 crores of EBITDA, with 7.64 million tonne of production that comes to over INR 19,800 with a simple mathematics. And we don't have any other income from anywhere else in the country.

And now coming back on the one-off business and as I told you, the 600,000 tonnes of stock, which got stuck up in the inventory, which got stuck up in our plants, because of non-availability of rakes. So that has created or skewed the numbers to south side. So that you must be feeling. And this is the reason, I'm telling you that -- now still today, there was shortage of rakes. But now for the last 10, 15 days, the rakes ability has increased because the export of iron ore banned by government. So the rakes carrying iron ore and pellets to port those are stocked. So now the situation should be better.

I think by July or by mid of August, you will see not only our company, but most of the steel industry will be at a very lean inventory in finished good side. And once you have lean inventory, then it has direct relationship with the EBITDA level. Because when you sell more, you realize more, the money comes in, the money flows in and you get higher EBITDA. So this is what we are aiming. But the point here is that we are treating the total EBITDA level in a year divided by the total sales and that becomes the total per tonne EBITDA in thumb rule for a common investor and for a common person in the country.

[Kamlesh Bagmar, analyst]

And sir, secondly, on the part of like your coking coal cost, because as you maintain that, we carry a good amount of inventory. So it would be very easier for you to, like say, guide us that how much increase in coking coal cost would be there for the quarter or change in quarter-over-quarter basis because every steel company shares that data. And apart from that, how our NSRs or margins are compared to like what we did in the Q4?

[Vidya Sharma, executive]

I'll tell you 1 thing. And you see, as I told you earlier also, the question was asked by some gentlemen on the energy prices. And I also told you that we are going to be in 50% using the domestic coal in making steel and 50% imported steel. Out of that 50%, at least 27% to 28% of 50% -- or say, of the total, of 100%, that comes from our own captive mines.

And now those mines are also independent entities, and we have a price formula with them that from index -- there is an index price. And with respect to the index, depending on the quality, services, delivery, from soda ash level, and the sulfur contents, what should be the price to JSPL, and this is what we are working with them. Now, as far as the overall cost is concerned, today, as I told you, from $520 about 5 weeks back and today it is $465.

[Kamlesh Bagmar, analyst]

Sir, please -- will you please quantify that amount, sir?

[Vidya Sharma, executive]

Amount is $55 to $60 per tonne of the coal. Hello?

[Kamlesh Bagmar, analyst]

It was $60 in last quarter. I was asking about the Q1, how much increase we will have in the coking coal cost or the overall blended coal basis cost?

[Vidya Sharma, executive]

So that I think we have to compute and tell you, because offhand these numbers are not available. Nishant will send you.

[Nishant Baranwal, executive]

Kamlesh, I will connect with you and give you those numbers separately.

[Kamlesh Bagmar, analyst]

Yes. And lastly, sir, on the INR 3,000 crore, we have got.

[Nishant Baranwal, executive]

Kamlesh, if I can request you to.

[Kamlesh Bagmar, analyst]

Just last question.

[Nishant Baranwal, executive]

And I'm really sorry.

[Operator]

The next question is from the line of Vishal Chandak from Motilal Oswal Financial Services.

[Vishal Chandak, analyst]

I just wanted to understand, what is the current monthly production run rate and dispatch run rate from your Australian coking coal mine? And what is your target for full year, I understand we were expected to do about 100,000 tonnes starting March itself. And where are we in that position, right now? That's my first question.

[Vidya Sharma, executive]

So we started with a very humble beginning of about 40,000 tonnes per month. Now we already reached the production of about 70,000 to 80,000 tonnes per month. There were some logistic issues in between, but I think business has stabilized. We could earn a positive EBITDA of more than $13 million last year, and this will increase further.

[Vishal Chandak, analyst]

Sir, just wanted to understand what is the target for the production and dispatches and not the EBITDA part, sir?

[Vidya Sharma, executive]

I told you about 1 million tonne.

[Vishal Chandak, analyst]

1 million tonne is what we intend to produce and dispatch to India or sell outside, whichever it be?

[Vidya Sharma, executive]

No outside, no outside sell to JSPL.

[Vishal Chandak, analyst]

The second question was with respect to your effective savings of INR 4,500 that you mentioned. If you could just quantify that once again, I think, I missed that. You mentioned about because of savings in the exchange rate and BC is about INR 3,000 what you expect to gain.

[Ramkumar Ramaswamy, executive]

I will tell you. The numbers are following. Number one, the iron ore price is because we use a lot of fines. The iron ore fines prices have gone by INR 2,000. It directly equates to 1.6x, that is INR 3,200.

[Vishal Chandak, analyst]

The reduction in iron ore fines currently in INR 2,000, and that translates to INR 4,500 gain, that's what you are referring to?

[Ramkumar Ramaswamy, executive]

No. That translates to INR 3,200. 1.6x -- 1.6x of -- we need 1.6 tonne of iron ore to produce 1 tonne of steel. So INR 2,000 will tantamount to INR 3,200. If it is INR 1,000, it is INR 1,600.

Okay. Then next is the coking coal. So the coking coal prices I told you the averaging, the impact has already come to about $25. Though the total delta is about $55 to $60, but that will come in the subsequent months. So this will give us about INR 4,500.

[Vishal Chandak, analyst]

So the average reduction in coking coal consumption cost for this quarter would be about $25?

[Vidya Sharma, executive]

Yes, that is in dollars. Consumption not in kg but dollars.

[Vishal Chandak, analyst]

Just wanted to check one thing, while JSW Steel in its recent conference call had highlighted that their coking coal cost would be up by $125 in this first quarter. You are -- you have just mentioned that your coking coal cost is down by $25. Have I reconciled it properly or I've missed something?

[Vidya Sharma, executive]

You see. I'll tell you. It depends that how much stock in pipeline you have. So if JSW -- I cannot comment on JSW. If they have the high priced stock in pipeline, then it will be up to them.

[Vishal Chandak, analyst]

No, I'm not comparing the JSW. I'm just highlighting that this is the general -- because Tata Steel also guided for a higher cost going forward. So what you're saying is that our cost is about $25 lower on a Q-on-Q basis.

[Vidya Sharma, executive]

I tell you one thing. I think you have not given attention to my previous word. At least 28% of the total coal, or 50% of the total coking coal, we import from our own mines. So that you have to take into consideration while computing the cost of -- or impact of coking coal, vis-à-vis coking coal impact on other companies. So I'm unable to tell about the other companies, but I can tell only for my company.

[Nishant Baranwal, executive]

So, Vishal, just to string together both the thoughts, what MD sir is saying and there what you are thinking about is if you look at our mines, right. While JSW and Tata might have guided and that is the same market everybody...

[Vishal Chandak, analyst]

Nishant, just to quickly come to the point, I'm just looking at the blended impact. That's it.

[Nishant Baranwal, executive]

Vishal, can you hear me out, please? Request you to kindly hear me out. I'm saying all the steel companies deal with the same coking coal markets, all of us import coking coal. Now, do the impact of the coking coal on the business, on our numbers, is largely differential depending on the coking coal -- captive coking coal we have.

Now, as MD sir said, we have Australia and Mozambique. So on a consol level when you look at it, what MD sir is implying that the differential between them and us would be on the consol level because it would not impact us as much as it will impact Tata Steel and JSW.

Now, if you were to ask a point-blank question, how much has been the movement in coking coal? I think if Tata Steel and JSW have given a number on the impact, it is the same market, but the impact on the company would be lower because we have our own captive coal. That is just trying to string together all the thoughts here.

[Vishal Chandak, analyst]

Fantastic. That really helps because of the impact of the coking coal captive mines, our cost is expected to be about $25 lower on a sequential basis.

[Nishant Baranwal, executive]

I wouldn't put a number to it.

[Vidya Sharma, executive]

Okay. Okay. Okay. Please carry on. Next question.

[Operator]

Ladies and gentlemen, that was the last question for today. I now hand the conference over to Mr. Nishant Baranwal for closing comments.

[Nishant Baranwal, executive]

Thank you, everybody, for joining the call with us today. Apologies, we were delayed by 15 minutes. I would like to apologize on that part. But thank you again, and thank you for your support throughout this.

Thank you, JM for organizing the conference call. Over to you, Ashutosh.

[Operator]

Thank you. Ladies and gentlemen, on behalf of JM Financial, that concludes this conference call. Thank you for joining us, and you may now disconnect your lines.

[Nishant Baranwal, executive]

Thank you.

[Operator]

Thank you, sir. Thank you, sir.