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Jindal Stainless Ltd
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Ladies and gentlemen, good day, and welcome to Jindal Stainless Limited Q2 and H1 FY '23 Earnings Conference Call, hosted by Nuvama Wealth Management. [Operator Instructions] Please note that this conference is being recorded.
I now hand the conference over to Mr. [ Ashish Kejriwal ] from Nuvama Wealth Management. Thank you, and over to you, sir.
Yes. Thank you, Vivian. Good afternoon, everyone. So on behalf of Nuvama Wealth Management, we welcome you all for this Q2 and H1 FY '23 conference call of Jindal Stainless and Jindal Stainless Hisar.
We are pleased to have here Mr. Abhyuday Jindal, Managing Director, JSL and JSHL; Mr. Anurag Mantri, Group CFO, Jindal Stainless; Mr. Ramnik Gupta, CFO Jindal Stainless Hisar; Mr. Goutam Chakraborty and Ms. Shreya Sharma from the IR team.
We are pleased to note that this quarter, despite a difficult situation, company has reported EBITDA per tonne of INR 15,000 plus, which makes first half FY '23 total EBITDA per tonne of around INR 18,000 plus, which is in line with their guidance; however, management will continue to maintain that guidance. And after that, I can just hand over the call to Goutam for further proceedings. Over to you, Goutam.
Thanks, Ashish, and good afternoon, everyone, and thank you for joining us. We'll begin this call with a brief opening remarks from the management, following which we will open the floor for an interactive question and answer session.
Before we start, I would like to state that some of the statements made in this -- today's conference call may be forward-looking in nature, and the disclaimer in this regard is available in our results presentation, which was shared earlier with you.
I would now hand over the floor to Mr. Abhyuday Jindal for his opening remarks.
Thank you, Goutam, and good afternoon, everyone. On behalf of the management team, let me welcome you to the earnings call for Q2 FY '23 of Jindal Stainless Limited and Jindal Stainless Hisar Limited.
I would first like to discuss the key business highlights of the quarter following which Anurag will take you through our operational and financial performance. Globally, demand for stainless steel decelerated throughout Q2 FY '23 primarily on account of high energy costs, inflationary pressure, aggressive rate hike, rate hikes by the U.S. Fed and recession risk in key economies.
But on the domestic front, demand from end user segment continued to be strong. Development and supply of niche value-added stainless steel grades and critical materials across various sectors and our agile business model allowed us to effectively increase our sales volume and achieved highest ever quarterly domestic sales of around 95% on the total sales volume.
Demand continued to remain steady in the automobile sector, registering a growth of nearly 28% quarter-on-quarter basis. The company supplied new stainless steel grades, including 432 along with existing grades like 436L and 439 to various auto majors.
In the P&T segment, average sales in Q2 FY '23 increased by 41% over Q1 FY '23. Demand was also strong in the lift and elevator segment. Indian Railways continued its thrust on increasing its share of business in freight. This led to a 25% jump in our sales to the railway wagon segment.
We also see strong opportunities in core segment too. Vande Bharat trainsets will remain a major focus area for the railways. It is also heartening to note that India is expected to invest INR 80,000 crores in metro projects over the next 5 years, which will further increase the opportunity for our premium stainless steel offerings.
On the export front, stainless steel industry has been facing continuous challenges with no relief on the export duty front. During Q2 FY '23 and H1 FY '23, combined exports stood at around 5% and 13% of the total sales, respectively.
Domestic sales volume, on the other hand, has remarkably increased compensating for the volume loss in the export markets. I am pleased to inform you all that we have successfully developed and stabilized various stainless steel grades in the 400 series. We have also concluded multiple strategic orders for the specialty grades in the lean duplex family.
Additionally, we have dispatched our first ever order of 304 grade for ISRO's critical application requirements. On the ESG front, let me update you that we have initiated Project Samanvay with EY in order to -- for 2-prong strategy; a, to achieve its environmental, social and governance goals; and 2 is predict greenhouse gases emissions and set carbon neutrality targets in accordance with the science-based target initiative.
We are dedicatedly taking up real-time environment surveillance monitoring for air quality, water quality, work zone monitoring, effluent analysis and noise at various locations. We also carried out the plantation drive of over 2,500 trees inside the premises.
JSHL has successfully commissioned a 3.5 megawatt rooftop solar power generation project. We are actively evaluating renewable energy projects for our future power requirements. In addition to this, the company has set an organizational goal to reduce its carbon emissions by over 1 lakh tonnes in FY '23 for the merged entity. We are cognizant of our environmental responsibility and are committed to helping the nation to prepare for a sustainable future.
With this, I would like to hand over to Anurag to discuss the operational and financial performances.
Thank you, Abhyuday. Good afternoon, everyone, and a warm welcome on the call today. Hope you had a chance to go through our earnings presentation, which was shared with the stock exchanges and today's call discussion will be on the same lines.
As Abhyuday mentioned, and as you all know, that this quarter witnessed a major impact of the export duty, coupled with the ongoing challenges in the global macro situation. Raw material prices do continue to remain volatile during the quarter with nickel prices falling by 24% quarter-on-quarter and goes of ferrochrome by 18% on quarter-on-quarter. This impacted the realization and profitability of domestic manufacturers.
Despite these challenges, we could adapt to the changed market dynamics quickly and emphasize our focus on the domestic sales through development and supply of niche value-added stainless steel grades and efficiently increasing our volume across segments, especially into auto railways, pipe and tubes and lift and elevators.
Let me now discuss the operational and financial performance during Q2 and H1 FY '23. Backed by strong sales volume, the pro forma combined revenue of Q2 FY '23 rose by 10% and 6%, respectively, on Y-o-Y and Q-o-Q basis to INR 8,628 crores.
EBITDA impact were recorded at INR 694 crores and INR 360 crores, respectively. On a half yearly basis, the pro forma combined revenue grew by 19% Y-o-Y to INR 16,744 crores. EBITDA and PAT for the same period stood at INR 1,526 crores and INR 836 crores, respectively.
Performance of the global subsidiary was adversely impacted, as mentioned by Abhyuday, due to the tough global headwinds, inflationary pressures and recession risk in the key economies and export duty. On a half yearly basis, however, our combined EBITDA of all the operating subsidiaries stood at INR 78 crores.
At the end of Q2 H1 FY '23, our pro forma combined entity net debt stood at INR 2,757 crores, down by 42% and 12%, respectively, as against FY '20 and FY '22 level. Despite being in the CapEx cycle, we continue to focus on the robust balance sheet and prudent capital allocation, which has helped us to improve our leverage ratios of the combined entity with the debt equity of 0.3x and debt EBITDA of 0.7x, which is one of the best in the metal sector.
On the merger update, let me intimate you that NCLT has given the next date of hearing on November 11, 2022. The merger is expected to complete in FY '23. Also, I'm pleased to inform you that the shareholders of JSL approved the acquisition of 74% of JUSL from OPJSTPL through postal ballot with an overwhelming majority on September 3, 2022.
Our agile business strategy has been helpful in supporting our overall performance during the challenging times. We will continue to focus on our core strength to optimize our operational and financial performance going ahead.
With this, I would like to end my discussions and would request the moderator to open the floor for the Q&A session. Thank you.
[Operator Instructions] The first question is from the line of Amit Dixit from ICICI Securities.
Congratulations for a good set of numbers in a very challenging quarter. I have 3 questions. The first 1 is on essentially volume growth. We saw very impressive volume growth Q-o-Q in both JSL and JSHL, while you have highlighted certain segments will be autos that contribute to growth.
Just wanted to understand better where this growth is coming from, particularly in 200 cities, whether it is 300 or 400, was there any pent-up demand in certain segments that you expect to taper off? And what about the volume guidance for the year? That is the first question.
Thanks, Amit. So as we mentioned, the volume growth was in the domestic market for us came across the segment. And because most of the volumes we actually then diverted to a domestic market due to the export duty. And good thing was that some of these growth which came into the premium segment, which is like auto.
Auto average sales grew almost 28% on a quarter-on-quarter basis due to the steady demand in this. Similarly, railway, the growth primarily came from SS uses in the wagon. So wagon because on a freight side, the railway continued to increase focus, which then wagons took us the good demand from -- for our overall sales mix.
Pipe and tube was another segment, which grew almost 41% on a quarter-on-quarter basis due to the good demand from construction and infra. So it was across then -- the lift and elevator was also like we captured almost 95% of the shares of the market. And this applies to all the major elevators, which is [indiscernible] Mitsubishi, Schindler. So this is the across. So it was all across the spectrum of the various segments.
On -- your question was on the mix then, I assume, second question. So because of this, the overall, if you see 400 series volumes in JSL share was almost 31% and 300 series, which was last year about 56% has come down to 46%. And 200 series also increased 18% to 23%. So that's how -- basically, it's because the volume -- the demand was coming across the segment, and we were able to capture balancing between the volumes and the price. So we continue to choose the segments carefully.
Okay. And what about the guidance? Because we heard that last time, it was slightly muted guidance so would you revise the guiding upward?
So last time, we gave the guidance of 5% to 10% volume dip expected than the FY '22. Now I think with this trend, we are expecting we will close at least a flat volume growth in line with FY '22. So at this stage -- so we will -- we are upgrading the guidance in terms of the volumes, which was earlier expected to be down by 5% to 10% from FY '22 level, but now at least we expect that FY '23 should be flat of FY '22 levels.
Great. The second question is on the CapEx spend. So the number in cash flow statement indicates that the ongoing expansion projects have gathered momentum so the CapEx spend has also gone up.
So would you please let us know the status of completion of the ground feed expansion at JSL. And what kind of -- I mean, whether it would be like we can expect some volume growth from it towards the end of FY '24?
CapEX -- all the CapExes are on track and everything is what guidance we gave. All the facilities will come within that time line. So that's on the CapEx side.
On the growth side, we will -- we were expecting a faster pace, but I would say we will -- we'll have to watch the next 2 quarters carefully. With that, we will see -- we will -- we are still expecting that at least 20% of growth we should be able to deliver in FY '24 over '23, but I think we will rather watch the development. Out of the new capacity, we are expecting at least 30% capacity utilization can be achievable despite all the other challenges, if continued to remain at that width in FY '24.
Wonderful. The last question is on the share of import. So if you can quantify the share of imports in domestic consumption in Q2 FY '23 and what was the increase in export from -- imports from China and Indonesia. Do you think [indiscernible] this time, I don't know why it got missed.
The imports in this quarter was close to 32%, 35% of the overall consumption in the country. Chinese imports continue to -- however it used to be 60,000 in June came down actually to less than 40%, but again, it has crossed -- reaching almost 40,000 -- 50,000 in September. So it's been up and down on the Chinese import side.
And Indonesia?
Indonesia, we are seeing a declining trend in the impot side. It used to be 20,000 plus, it's right now running at less than 10,000.
Okay. So with the decrease in import pressure and our own volume growth, that should give you a lot of confidence actually to deliver good volumes in H2 also if imports redeem -- I mean or go down further, I guess.
Yes. That's the reason we are revising our guidance of -- instead of volume decline, we are seeing at least the flat volume looks achievable at this stage now with our confidence level what we delivered in Q2.
The next question is from the line of Rajesh Majumdar from B&K Securities.
Congratulations once again for decent set of numbers. So my question was, sir, we have seen the effect of high-cost inventories also in this quarter, right, getting liquidated because of the high increase in volumes.
So what would be the extent of that inventory liquidation impact? And since the prices are again forming now especially ferrochrome, et cetera, what kind of inventory-related loss can come back in 3Q and 4Q? That was the first question.
Rajesh, in our business, actually, because it's a balancing between the volume and the realization and the margin. So it's difficult to segregate the inventory valuations number in a concrete manner.
But typically, the trend which we have been saying, we get almost a time lag of 40 to 45 days to pass on to the customer. So in a downward raw material trend, we always get a negative valuation impact, which was there in the quarter also because of the down movement in the prices, but quantifying that number looks difficult so that's why the guidance we gave is actually 18,000, we are taking care of everything which comes -- which could come into the play during these volatile times. So we are not segregating that guidance that in case of continuous trend, we will not be able to deliver such volumes.
Right, right, sir. Fine. And my second question was, sir, recently we've been seeing a hardening of the spreads in SS 300 series, particularly where the product prices have been firm and increasing somewhat, whereas from September onwards, there is a sharp decline in the scrap prices.
And how -- I mean, I know you have a longer-term contracts and all that. So what is the impact? Because the overall impact on the spread is nearly INR 15,000 plus per tonne. So obviously, entire thing cannot be captured in terms of the spot spreads, but what kind of impact on that can we see in 3Q or more in 4Q?
See, Rajesh, actually, the raw material is also, again, the source of raw material and the price we select on our supply chain is also a combination. So -- it's not -- it's difficult to -- because see, what happened when the raw material and the scrap prices starts falling, the spot prices of the finished goods also start adjusting immediately.
And also because we have to lift a larger quantity of raw materials. So we have seen the movement we paused for some time in the scrap market, we see suddenly the prices falling down. But when we start gathering the quantity, the prices start going up immediately. So those scraps are available for the limited quantity. So that's the reason -- it's a very fine balancing of the various raw material sources for us.
No. But the widening of the spot spreads or the flattening should matter to you in terms of, right, the overall profitability of the product to some extent, I mean. Even if you are seeing that the quantities impacted -- impact the prices like, for example, SS scrap has fallen from nearly -- 304 scrap has fallen from 1.38 lakh to 1.18 lakh and the finished prices have actually gone up, is what the 1.5 months data suggest.
So that means a sharp increase in the spot split. And my question is, sir, how much of the spot spread impact actually comes in for us, if you can get some kind of a judgment on that?
So let me give you 2 parts to this. One is that why it cannot be exactly reflected because 1 is that it also depends on the sales mix, which we are selling. So as we mentioned, like auto, railways if you had more on the 400 series, SS scrap will not matter that much. That's 1 part because it's always end us, then we don't go with that -- this much of 400 series mix has to be sold or this much of 300.
What we go with that how we capture the best margin orders for the across the various segment irrespective of the grade. That's what -- how our business strategy moves, which is helping us in terms of maintaining that more consistent volumes and the growth in the earnings side.
Second part is that the scrap also the movement we have seen in the market, we -- or for some of the scrap buying, we see the prices going down, but the moment we start buying as a large buyer, we see that initial -- those price sources are actually limited in terms of the quantity. So it's much more complicated than -- it's like a similar way of stop buying, let me tell you because when you start getting the large order, we see suddenly the prices -- the next order goes into the larger size. So it's a very fine balancing...
Also to add that domestic SS scrap is not our only source of nickel or scrap that we buy. So it is only domestic, what you're saying is correct, there's been a sharp decrease. But in the world market and other forms of nickel, there hasn't been [indiscernible] we need to look at all our sources.
Okay. So let me just ask you a final question Anurag ji, would you have had a higher EBITDA per tonne for 2H as compared to earlier guidance because of all the factors of inventory -- because it's like since the actual numbers are more complicated, would you have had a slightly higher profitability figure for the rest of the year?
Not right now. We will say that we will not change the guidance right now. FY '23, what 18,000, I think we will maintain at this stage, and we'll rather watch for 1 more quarter the trend.
The next question is from the line of Ritesh from Investec.
I have 4 questions. first question is, 1 is on JSL, JUSL, what are the incremental milestones that we have to look at? Secondly, if you can just help us the debt and EBITDA numbers for JUSL for first half. So that's the first question.
The second question is any update on MCL. Third question is if at all reduction in pledges by when can we see that? And the fourth question is what will make us, again, competitive on exports. We know that we have Section 232 Europe. There are additional duties which are there, given by European Union press, the government's 15% export taxes. So if the export volume has to move up again, what is it that you are doing about it? Those are the 4 broader questions.
Okay. Thanks, Ritesh. Sorry, let me just try to see if I missed some questions, I think you can again ask me that question, I think, because you have asked too many questions. But let me try to see what I captured.
One is that you asked about the JUSL debt and EBITDA. The JUSL current debt is around INR 1,965 crores and the EBITDA for the H1 was INR 275 crores. That's 1 question. Second question was on the pledge side, the reduction of the pledge. Reduction of pledge as we mentioned, the banks are completely aligned. I think it's taking a more a process time to how to actually navigate that into whatever has been released, but let me tell you the good story is that all the term debt, which was having a pledge has been repaid.
So there is no term debt right now, which has a pledge right now in the JSL. The pledge, which is getting reflected now only on the working capital. So see, for term debt it was easier because we repaid that thing and we got it replanned with the new debt thing and none of the new debt we have given the pledge.
So there's no term loan now existing in JSL, which has a pledge. Working capital thing, unfortunately, because of especially the LC thing, which is ongoing, there cannot be a 1-day cutoff for the repayment and taking the new facility. So it's a process which we need to obviously get the press released from the old [ TDR lender ], which is led by SBI, so -- which we are actually in the process and they are assuring us because even in their new loan of term debt, which they have extended to us for the project, there's no lag pledge in that particular loan.
So they have removed all the pledge and subsidiary pledge requirement of the new loan and disperse that loan on that basis. So just I think -- I know we have been saying that, and we are also a bit of disappointed by the progress at the PSU lenders on working capital side, but as a proactive step what we have done, we have repaid entire debt -- term debt in JSL, which was on a pledge and refinanced it with the new debt, which is also not under pledge.
JSHL is still existing, but we will be -- we are just waiting because of the certain assurance. Otherwise, we will do the same exercise in JSHL, and we will not have any of the share -- term debt, which will have a pledge.
That's useful. Update on MCL and then the export question?
See MCL, the matter is in court. So obviously, there was a bidding process, and it's in public news that the 3 key parties who are there in the bids were actually us and 2 other players. And we were actually -- we were the front runner. However in between, obviously, it was challenge at the court. And in between the lenders also offered loan to the ARC to offload which was led by [indiscernible] because resolution sometimes can go long.
So that process was also run separately, but other matters isn't -- so right now, there's -- I would say there's nothing to update on the progress of MCL. I think it will take its own course.
Another thing was on export side that -- your question on export side is that how can we gain the volume in export market, is that the question?
Sir, the question is, so government imposed 15% export taxes, that's 1 thing. Prior to that, European Union import taxes on India, China and Indonesia, we were still able to export into Europe despite that move.
But at that point of time, we did indicate that we will still be competitive in the U.S. market. So I think export market is probably important and probably more lucrative. So if we have to regain our competitiveness back, what are the regions that we are looking at. So when it was Europe, we did indicate about U.S., but U.S. also has Section 232.
So what are the other regions that we are looking at, say, hypothetically if the domestic market is sluggish, is exports even an option for us. How should we look at it?
Yes. Maybe because see, right now, there was obviously a recessionary risk and inflationary trend and all sort of things in both the market, but I'll let Abhyuday answer this question that how the recovery can come in export market.
Yes. So Ritesh, thanks for your question. Basically, definitely, with the export duty overhang, it is going to be a big challenge for us. And like as you said, this [indiscernible] so as of now, it is a challenge, but because of our long-standing quality approval that we have, our customers are still sticking with us. They still want to -- still take some quantity. So despite selling at a very low margin export, we're still continuing that and we will still continue to the tune of, if it does get further sluggish. Domestic, we're seeing good demand, and we're seeing good play in all segments if we are infrastructure and auto and railway.
Railway especially Q4 always picks up. They always drag behind for the full year and Q4 is always a bumper time for railways. So we don't see any real sluggish or slowdown in demand in the domestic market that we're still quite bullish on.
But with the export duty overhang increasing export sales with the way the world market is in sort of a recession right now, it is looking at a challenge. So we're quite bullish that domestic will -- volumes will be maintained and they will further grow. And whenever required at very low margin, we can always push to export volume. As of now, we don't want to do that.
Sure. If I have to just rephrase the question, given the volatility that we have seen in the commodity prices, I'm pretty sure that our mix on 200, 300 and 400 series would have changed on a quarter-on-quarter or year-on-year basis.
Even if for that change, would you assure investors that our profitability when we look at it on an EBITDA per tonne basis, it is something which is pretty much similar across the 3 grades and it would not have much bearing on the profitability going forward?
So our overall guidance, we will still maintain. Between the 3 grades, there is definitely variation and there are certain segments and certain low-paying segments. But our overall guidance combined all 3 between 18 to 20, I think we will still maintain that.
[Operator Instructions] The next question is from the line of Vikash Singh from PhillipCapital.
Sir, I just wanted to understand this 20% growth in FY '24, which you are envisaging, so is it taking into assumption that the exports have -- would resume or you do the scope that only from the domestic demand, you would be able to take up that let's say, 15% or 20% growth in FY '24.
And if so, we are obviously talking about much high growth than the industry level. So where this growth are coming from basically?
See, one, let me just clarify that. It's not that we are driving right now for the growth on the FY '24 over FY '23. That's what I said, we will have to -- directionally, we should target that, but it's not the guidance right now.
And we have to watch for another 2 quarters that's what I mentioned. So that's first clarification. Second, what we -- the question was asked about the new capacity utilization. So earlier, we would have -- obviously, we would have ramped it up much faster, but at this stage, also we are working through ramp up at least the 30% of the enhanced capacity utilization during this period, 25% to 30%. That's what our endeavor.
But I think for guidance of '24 number, I think that's what -- overall, we can assure you that what we are working is that at least the new capacity which comes at the 25% to 30% of that utilization, which should be targeting to ramp up. But I think the next -- end of the next earning call will be the best time to give us the FY '24 from guidance.
Understood sir. Sir, my next question pertains to our -- once the capacity comes in, in terms of 30% utilization or 50% or 100%, how is the operating leverages move, sir? Have we done any internal calculations, which you could give us also a kind of idea that what kind of the operating leverage would come into play?
What do you mean by operating leverage? Are you talking about EBITDA per tonne...
The EBITDA per tonne, the fixed cost limit would get spread further. So some more savings would be coming in because of the higher utilization level.
See. Right now, so effectively, if I understand you are asking for FY '24 EBITDA per tonne guidance. Let me tell you, which is a bit early for us to say right now because, see, ultimately, it will be a fine combination as you would have seen in the last 2 quarters.
We'll have to have a very fine balancing between our volume and the price segment, which we want to go. We have opportunity. India is still dominated by imports in SS. So technically, we can sell the entire volume, but at what price point and what price product quality we will compromise that will have to be a very, very fine balancing.
And we want to keep our thing into the premium and niche segment and more on the quality segment, not getting into a substandard quality segment and compete on the price. So it's a bit complicated than what it looks like. And that's what I'm saying it's difficult to have an EBITDA per tonne guidance that incremental savings, which will be able to achieve to increase the EBITDA per tonne guidance at this stage.
I think let's wait for some time how we move development and the external market moves and how the other segments in the domestic market moves. And we will give you that guidance on -- so when we give the guidance, we take care of all the things in terms of the inventory valuation in terms of the various savings, which will be coming from the -- which will -- through operating efficiencies and sourcing efficiency, we keep working on.
So sir, fair enough. Sir, just 1 more question. In terms of -- in the Jindal Stainless, our subsidiaries had made losses. So just wanted to understand, is it there some one-offs which translated to the loss at the EBITDA level? Or how are they doing right now? Has the situation improved?
Yes. So I think global subsidiaries were actually -- as you mentioned, the global markets are actually under downward pressure in stainless steel. One was because of across the economies, which are facing the recessionary risk and inflation pressure. So we see some challenges on the European market. Abhyuday, you want to explain to this?
What was -- sorry, can you repeat the question?
Yes. So I was talking about the basically European subsidiaries making losses and some other subsidiaries also. Total loss in the JSL level is roughly about...
So our service center has still done well despite the challenging situation in the domestic market. Service centers still fully performing and done well. Lifestyle business, because it's being a consumer-driven business and prices that we were fixed, so there we face certain challenges, but now what we have done in lifestyle business is also, we have gone and discussed with various government agencies and we've got a price variation clause done.
So that we were taking care of any kind of future aberrations that happened because of this. So both our domestic subsidiaries, definitely JSHL has done well. Q4 guidance for lifestyle is looking very good. We're seeing all our orders coming back in black. So that will also perform well. The global subsidiaries are under a bit of pressure right now, and that will take, I would say, another 2 quarters until the global demand is back up and running or the export duty moves out. Until then, there will be still pressure on those 2 subsidiaries.
Understood, sir. Sir, just 1 last clarification. So we did not see any one-offs -- like some of your peers, one-off inventory losses or any kind of one-off losses during this quarter.
Vikash, as I mentioned that the inventory losses are difficult to be separated for us. It's -- inventory losses is like the negative inventory valuation, which is in the falling raw material prices. That they are -- as we mentioned, it was there in Q2, even in Indian company as well as the cross because when in the falling recession prices, you will always have a negative inventory valuation.
But those numbers cannot be quantified because it's blended with the part of EBITDA by the time it gets passed on.
The next question is from the line of [ Rithvik Sheth ] from One-Up Financial.
I have a couple of questions. Firstly, what is the CapEx for the rest of the year in H2 and for FY '24?
The CapEx in H2 should be in the range of around maybe INR 600 crores to INR 700 crores.
Okay. Both the entities combined?
Yes, both the entities combined around, say, INR 700 crores CapEx, you can take.
Okay. and F '24, what will be the maintenance CapEx?
Maintenance CapEx between these 2 companies combined together runs close to INR 350 crores of the number.
Okay. Sure. And sir, my next question is on JUSL, what is the expansion status there to 3.6 million tonnes. And when will it be completed?
So JUSL expansion is on time. I think by end of this fiscal year, that also should be completed.
Okay. So it will be at 3.6 million, right? .
Yes.
Right. And it seems that debt has decreased from March '22 numbers. Is that understanding right?
In JSL?
No. In JUSL.
Slightly, yes. That debt has decreased slightly, yes.
Okay. Sure. And sir, what would be the pro forma net worth of the company? I believe there will be some cancellations, so if you can share that number?
It's around 10,400.
Okay, sure. Okay. So the investments in JSHL will get canceled out, right?
Yes. Cancel out, and then there will be some kind of additional -- addition also. So the total impact will be around 10,400, which is pro forma number. Actual number, when it calculated, it might be a little different, but so far, pro forma number is this one.
Sure, sure. And sir, 1 last question on JUSL. We mentioned that sometime in FY '24, we'll be acquiring -- we'll be completing the acquisition. So does that time line stay?
Yes.
Okay. So we'll be paying out that INR 950 crores and will be getting in the debt of about INR 2,000 crores.
Yes.
The next question is from the line of [ Ankit Deora ] from Kotak Investment.
Just a couple of questions. One, on the JUSL acquisition, any specific milestones or by when we expect the pay out, anything in H2 or everything in FY '24?
So we have got the shareholder approval now, and we expect to close this in FY '23 itself. We gave the time line till June '24 last time -- June '23 last time. But I think in all priority, now approvals have been received. We will close this transaction during this financial year.
Okay. And in terms of CapEx in JUSL, are we undertaking any blast furnace CapEx or something? There were some press releases around orders given to SRF projects or something? So this tends to be current CapEx or...
No, there is no blast furnace. This JUSL will be coming with the hot strip mill and cold roll unit as it is to the existing CapEx.
The next question is from the line of Hitesh Arora from Unifi Capital.
Just 2 questions. [indiscernible] NCLT status, what happened in the last hearing. I mean, what's the expected time line? Are we still confident of closing this by the financial year, the merger?
See, this hearing is to take into account of all the NOCs received from the various regulators, which is the tax authorities, GST authorities and all these things, which has been filed already, filed the note different certificate, we have got from all -- has been filed to the court.
Hearing is on 11th. Now, I'm not too sure whether this will be closed in this hearing or may have another short hearing, which we have seen typical pattern in the Indian court. But even with that, the short hearing, we are -- now we know that all the authorities have submitted the NOCs to the court. So it's more a process. And we hope to complete the transaction in FY '23 as per the guidance.
And just then on the JSL and JSL Hisar, just what -- so we've given a guidance of 18,000 or maybe 18,000 to 20,000 per tonne EBITDA. What's the downside risk to the guidance? What can go wrong from here for us not to achieve this 18,000, 20,000.
For FY '23, I think, 18,000 is right now an achievable guidance, looks like. Obviously, the dockside group risk always could be external market. But this time, I would say, 18,000 because we have crossed the 2 quarters. And looking outward for the next 2, 3 months, we are confident of delivering 18,000.
And for the next year, we'll see as it comes closer to the time. Would that be right?
Sorry. I didn't get you.
The next year -- for next financial year, we'd see closer to the time.
Yes, I think -- that's what because there are too many volatility happening across on even policy front as well as the global front.
But we should be -- all thing equal, we should be getting another say INR 3,000-odd crores or INR 3,500 crores additional on account of the merger benefit -- acquisition benefit of JUSL, which would be in the pulling charge, that should also come to us all things you need to.
Yes. Yes.
The next question is from the line of Dhaval Shah from Anvil Wealth Management.
Congratulations on good set of numbers. Am I audible?
Mr. Shah, your audio is a bit low.
Is it fine now?
Yes, this is better.
Yes. So I had a few questions. Firstly, on why there is an employee cost reduction in this quarter, any one-off? Or can you throw some color on that?
Also, if you can share some details on the coal cost this quarter versus the last quarter and the current prices and how the sourcing is done?
So employee cost was just some provision thing, which we do on the certain thing, which was actually a certain adjustment on the provision. Your second question was on that -- 1 was employee cost. Second was?
Coal cost for power.
Power. Actually, we did a very flexible thing on the power side.
So coal cost, those are overall, if we look at the linkages cost and the other costs on the spot prices were pretty much on higher side. But strategically, how we plan it is that we also procure the power from the grid.
So in overall, we just -- values are mixed in terms of the cost on the terms of the per unit cost for us, so which has come out -- come down as compared to the last quarter, if you look at it.
Okay. So can you share the per unit cost.
I think that would be difficult to share, but -- per unit cost of the coal?
Okay. And also -- yes. Yes, continue, sir.
Yes. See, because it's -- we keep doing the cost efficiency on a flexible way, depending on the fuel prices. Where we have mentioned that sometimes we actually put a pause and then bought it from the grids and when the case was higher and then do the blending things. So that's how we manage that entire cost.
Okay. And sir, if you share some lights on this Hygenco India or JV, how that deal is structured? And is there any CapEx or money we need to invest into that?
So I can maybe quickly answer this. There is no CapEx involved at all from our side in this. It is a total investment done by Hygenco. And it's a power purchase agreement. So it's a very pilot scale project. We wanted to test this project out. And if it does well and create good amount of green hydrogen, then we will go for a larger scale setup. So this pilot scale is -- yes.
So there's no CapEx or any investment from...
No CapEx from our side...
Yes. And sir, 1 more question, if you could answer. Sir, can you just throw some light on the capital allocation policy over a longer period of time because we will be done with the CapEx by end of this year and we will be generating roughly good cash flows. So how it will be -- are you looking for further CapEx or some payout or some color on that would be helpful.
So definitely, I think, Anurag, you can take this up, but we would like to give some dividend next year. That is still on our cards. And Anurag, maybe you can answer this question. .
So as we mentioned last time that the Board approved the new dividend policy where we first mentioned that obviously to target dividend up to 20% of the [ PAT ] on a progressive basis in the future because -- but only after the merger, we will consider that.
And CapEx side on this thing. It's always normal as you saw. We -- even in the CapEx cycle, we continue to maintain the ratio very prudently. So I think that's what you should take it more as a debt because as a growth, we will always continue to look for the right approaches, but obviously at the right ROE and in terms of the overall balancing our ratio.
Sure, sure. And sir, 1 more question, if I could ask. Sir, on JUSL, you said that the CapEx will be completed by end of this year. So is there any CapEx -- whatever the CapEx for H2, is there any debt required or it would be fulfilled from an internal accruals only for JUSL?
No, there would be an additional debt drawal in JUSL.
Okay. Can you quantify it, approx?
It would be probably INR 200 crores to INR 300 crores.
Okay. And CapEx for H2 in JUSL?
It's ongoing. It's all -- as I told you that it's what the numbers, which will be drawing the loan accordingly.
[Operator Instructions] The next question is from the line of Chetan Shah from Jeet Capital. Mr. Chetan Shah, can you hear us?
Yes.
Yes, kindly proceed?
Hello?
Yes, sir, we can hear you.
Yes. So I just wanted to know the JUSL debt number. Is it INR 1,955 crores.
It's INR 1,965 crores.
INR 1,965 crores? Okay.
The next question is from the line of Suraj Kokate from Axis Bank.
I just have a couple of questions. The first 1 is on finance cost of JSL. So I see that it has increased by around 19% this quarter on a sequential basis. If you could provide some details on this. And second 1 is that some of the recent media articles suggested that government is planning to impose an anti-dumping duty from stainless steel -- stainless stell tubes and pipes from China.
So are you aware of these events? Or -- and how likely is the possibility of implementation of this? And if this is implemented, what could be the impact on volumes?
So let me answer first on the interest cost. This quarter, there was one-off items of around INR 8 crores in the JSL cost, which was -- 1 was on the interest on the income tax -- advance tax, which was -- because last year, obviously, as we progressed on EBITDA, the advanced tax because -- at the end of the year, the EBITDA increased and initial advance tax was in the shortfall.
So that was on this thing as well as there was 1 interest payment on the settlement with the [ NALCo ], which is the power utility company. So that was the 1 which was there, which is coming into interest cost. And some of the other costs, which we do actually as part of the working capital management. Actually, the income from the debtors and discounting is going into the other income.
So it's not getting net of in JSL. That's how it's been reflected. Second question was on this anti-dumping. I don't know what are you referring it? Are you referring to some of the court case which happened in Gujarat?
AD/CVD on pipe and tube coming from China that is what your question was?
Right, right, right. Yes.
Yes. So that does happen, see, because we are not very -- we don't -- we are not very big in to pipe and tube ourselves. We are a supplier to them. So this is a welcome move, and it's a good positive sign for us because that would help us further push our volumes, and this is exactly what we have been telling the government that more people have become traders. They have started shutting their pipe and tube making facilities here and started trading materials from China. So that would definitely be a very positive and welcome move by us.
Next question is from the line of [ Saket Kapoor ] from Kapoor & Company.
If you could provide us, historically, what was our domestic and export mix, as we have seen that we are currently more -- 95% towards the domestic market so the 2, 3 years average, if you could provide?
See, Saket, as we mentioned with our agile model, we keep fluctuating in our export and domestic mix depending on the margins and the volumes that we can get. So typically, if you see that quarter 4 of last year, we reached to almost as high as the export volume of 30%.
On a full year basis, FY '22 export volume by 21% and currently, this quarter, it has come down to 5%. So it's quite fluctuating. Last quarter, it was still -- Q1 was 17%. H1 overall, we still maintain 12% now. I can keep giving you that many numbers, but I think overall, the blended volumes and the margins, which we target.
So sir, just wanted to understand the customer profile there in the export market, but this kind of a shift in towards the domestic market, how are the customers in the export market than Fed.
And what actually happens to those customers? Who are buyers of our products earlier, if we take the long-term averages also.
See, our customers are still with us. Despite all these challenges and disruption, there has been a recession and a slowdown in their market itself. And like I said, we have long-standing approvals, long-standing supplies, quality supply that we have given. So it's only a short-term aberration that is there.
As soon as export duty or the European market picks up again, then our volumes and our suppliers for these customers will again start.
And 2 small points. Firstly, sir, what are the benefit in terms of this acquisition of JUSL? And how is it going to be funded? And it is going to be consumed in FY '24? The 1 which we have taken...
The JUSL transition, as we mentioned, that it will -- we are targeting to close in FY '23 itself. And it will make us a completely integrated stainless steel play and also eliminate all the related party transaction.
So with JUSL, just to give you the ballpark number, FY '22 almost INR 1,700 crores transactions were there for the related party because it was doing a job. So all these will help us to improve the governance and eliminate all these related party transactions and which would have increased further with our increased capacity. So it will make us a completely interested stainless steel play with all facilities into the listed entity. That's how I think...
It's going to be a cash transaction completely so this INR 958 crores aggregate value that we have put?
Yes. Yes, it will be a cash transaction.
And who is the ultimate beneficiary in the trasaction for JUSL? How is owning the share?
It's -- OPJSTPL is the company, which will be -- which is owning this company.
Sir, we also find that there -- just a small point to...
Sir, sorry to interrupt, this is the last question that you could ask.
May I continue, sir? .
No sir, that was the last question. Thank you. We would now like to hand the conference over to the management for closing comments. .
Let me thank everyone for attending this call. Sorry, Abhyuday is actually just on the call. So I'm taking this on his behalf. We have been focusing on our agile business strategy to mitigate the external challenges.
I'm confident that our strategic steps will augment the future performance of the company. I hope we have been able to answer all your questions satisfactorily. Should you need any further clarification or like to know more about the development, please feel free to contact our Investor Relations team. Thank you once again for taking the time to join us on this call. Have a great time ahead.
Thank you. On behalf of Nuvama Wealth Management that concludes this conference. Thank you for joining us. You may now disconnect your lines.