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Jindal Stainless Ltd
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Ladies and gentlemen, good day, and welcome to the Jindal Stainless Limited Q4 FY '23 Earnings Conference Call, hosted by Investec Capital Services. [Operator Instructions] Please note that this conference is being recorded.
I now hand the conference over to Mr. Ritesh Shah from Head-Mid Market Coverage and ESG analyst, Materials, Investec Capital. Please go ahead.
Thanks, Ryan. We have with us Mr. Abhyuday Jindal, Managing Director; Mr. Anurag Mantri, Executive Director and Group CFO; and Mr. Shreya Sharma, Head of Investor Relations.
I'll hand over to call to Shreya to take the call forward. Thank you management for giving the opportunity to hosting. Over to you, Shreya. Thanks.
Thank you, Ritesh. Good afternoon, everyone, and a warm welcome on the call. Before we start the call, I would like to remind you about the disclaimer in the Q4 in FY '23 earnings presentation. As we might be making forward-looking statements in today's call.
Now I would like to hand over to my Managing Director, Mr. Abhyuday Jindal.
Thank you, Shreya. Good afternoon to all, and welcome, everyone, to the Q4 FY '23 Earnings Call for Jindal Stainless Limited. I would first like to discuss the key business highlights of the quarter and full year ending March 2023, following which Anurag will take you through our operational and financial performance.
The financial year 2023 started at the backdrop of macro challenges such as Russia, Ukraine war, imposition of export duty, making exports that competitive. Looking at our performance for FY '23 and Q4 FY '23, I'm very pleased with the results. Our agility and actability to the changing market analysts continued to help us align our sales volume to the domestic market requirements.
During these challenging times, we managed to deliver a 6% volume growth on a full year basis. It is a strong economic activity in the infrastructure sector that are pulling up report at the demand in the domestic market. Even though the market conditions remain challenging globally, we have been able to ramp up our export volume to 30% of our total sales volume in Q4 FY '23. With this, we achieved the highest ever sales for the quarter in Q4 FY '23 registering a 14% year-on-year increase.
On exports front, the demand in major economies such as EU and U.S. remains weak, but we are continuously looking for new sectors, segments and markets in different geographies. I'm also happy to share during March 2023, we successfully commissioned the 1 million tonne melt capacity along with supporting downstream operation in Jajpur. The commissioning of a project was well on time. And with this, we have reached 2.9 million tonne melt capacity, and we are now among the top 5 stainless steel producers ex-China.
Now let me give you a brief about the segment wise scenario. On the Railway front, the wagon industry continued to perform well. Metro demand also continued to grow, and this quarter marked the beginning of exports to Alstom for their Australian Metro project. Lift elevators segment is also showing a great strength.
In auto, despite the dip in the production of 2 wheelers, we managed to increase our sales by consistently increasing our market share with automakers.
For the Infrastructure segment, the outlook remains positive with strong growth potential in structural applications.
On the import front, subsidized and substandard foreign import continue to restore the level playing field against Indian manufacturers. Specifically, import from China and Indonesia witnessed a steep increase of 318% and 158%, respectively, from FY '21 to FY '23. The share of imports in the total energy consumption in India in FY '23 stood at 32%.
We are committed to ensuring the health, safety and wellbeing of our employees. In recognition of our efforts on this front, we agreed to have been recognized with the prestigious International Safety Award from British Council for the fourth consecutive year. We are committed to take concrete steps on ESG front and increase our usage of renewable energy. We plan to install 21 megawatts and 6 megawatts solar panels in our Jajpur and Hisar units respectively.
We also backed the India Green Award 2022 in the award category of sustainable energy achievement award. I'm also happy to share that we have signed the MOU with CII Corrosion Management division to help scale up the corrosion movement in India and improve the life expectancy, safety, reliability of public infrastructure. This would help increase the usage of stainless steel for various applications.
I will also let you know that after the successful acquisition of Rathi Super Steel Limited, Jindal Stainless has begun production in the facility ahead of the planned time lines. I would also like to share a strategic move that we have made by acquiring 49% stake for a consideration of around $150 million in Indonesia based Nickel Pig Iron Company, which is part of the eternal [ SCENE SHANG ] Singapore, one of the largest stainless steel and nickel producers in the world. This path breaking will enhance value for stakeholders with JSL acquiring a stake in nickel supply to create raw material security for its SS operations.
Finally, I am delighted to share that the merger of Jindal Stainless Hisar to Jindal Stainless Limited stands complete, effective from March 1, 2023, with the appointed date of April 1, 2020.
With this, I would like to hand over Anurag to discuss operation and financial performances. Thank you.
Thank you, Abhyuday. Good afternoon, everybody, and a very warm welcome on the call today. We have shared our earnings presentation with the stock exchanges and today's call discussions will be on the same lines.
Global nickel scenario continue to be challenging during the quarter, as highlighted by Abhyuday. However, we continue to remain focused and flexible with our product mix, segment and geographies. With extensive R&D and development of new bids, we are catering to the demand of various segments whereas our overall product mix. With this strategy, we delivered above our guidance and registered about 6% volume growth in FY '23 despite the headwinds.
On a shareholder results, it gives us a great pleasure to share that in line with our commitment to prudent capital allocation, the Board has the final dividend of INR 1.5 per equity share, taking the total dividend of FY '23 to INR 2.5, i.e., 125% per equity share with a base value of INR 2 each. If you recall, last month, Board approved a special interim dividend of INR 1 per share on successful completion of mergers. The total dividend outlay in FY '23 is INR 206 crores, i.e., 10% of our PAT in FY '23.
With this backdrop, let me now discuss the operation and financial performance during Q4 and FY '23. The deliveries for the quarter Q4 increased -- Q4 FY '23 increased by 14% on a year-on-year basis. The revenue for the quarter rose by 5% on Q-o-Q basis and maintain the flat on the year-on-year basis to INR 9,444.
EBITDA and PAT increased by 15% and 19% to INR 1,097 crores and INR 659 crores, respectively, on Q-o-Q basis. For FY '23, the combined revenue was recorded above INR 35,000 crores, higher by 8% on a year-on-year basis. EBITDA and PAT for the combined entity for the same period stood at INR 3,557 crores and INR 2,014 crores, respectively.
Global subsidiary performance continue to remain under pressure due to tough global macro environment. Performance of domestic subsidiaries remain satisfactory, contributing the EBITDA of INR 145 crores during the FY '23.
On the EBITDA side, we are quite comfortable. As on 31st March, the net debt of the stand-alone JSL stood at INR 2,591 crore, which is 18% down on a year-on-year basis and 8% down against December '22 levels. Despite the organic and inorganic growth CapEx, our debt equity improved further to 0.02x, and we maintain a net debt-to-EBITDA level of 0.7x.
I'm also happy to share that the merger of Jindal Stainless Hisar Limited to Jindal Stainless Limited was completed in FY '23 and total shares of a combined entity stood at INR 82.34 crore. We received listing approvals from the stock exchange on April 11, 2023.
I would like to share the credit rating side, the company has earned outlook upgrade from stable to positive by CRISIL and Fitch India rating. On the long-term debt, reaffirm rating at AA- and A1+ short-term debt with positive outlook. In case of JUSL acquisition, we expect that transaction to be completed within Q1 FY '24. Our operating and financial performance our testimony to our agile business strategy and a strong focus on balance sheet, which will continue in the future also.
With this, we would like to now -- I would like to now end my discussion and would request the moderator to open the floor for the Q&A session.
[Operator Instructions] Our first question comes from Amit Dikshit with ICICI Securities.
Congratulations for very good set of numbers. I have two questions -- I have two questions. The first one is essentially on volume. So if I look at volume, this is like the highest volume ever in the history of the company, and you are already running at a rate of roughly INR 2.1 million tonne or I mean, they are about at least about INR 2 million tonne. So what would be the volume guidance in FY '24? Also did this volume includes some amount of tolling volume assets?
So Amit, in terms of if I guess full FY '23 volume guidance, it was around 1.7 million tonne total. So it's not 2 million, so it's 1.7 million. And now for FY '24, we are seeing almost a 20% increase, which is around 2.15 million to 2.2 million tonne for FY '24. And [indiscernible] , I think will be over and above this.
No. So tolling what he means is a some of the trading [indiscernible] trading arrangement. So that includes Amit, the quarter for debt volumes improve some of those because our capacities were not ready for the new capacity. So that includes that So...
So 2.2 million tonne includes everything. So 20% growth over FY '23 is what we are committing.
No. So what I meant was and this is a follow-up, that your current run rate, not that your guidance in FY '23, your current run rate suggests that we are doing an excess of 2 million tonne. While the guidance that has been given is 2.15 million tonne, but all the capacities are already up and running. So -- and Moreover we have this rolling capacity in JUSL. So what I was meant was whether to include some of the 508 KG, does it include some volume rolled at JUSL? And if so, how -- what was the quantum?
Yes. So that includes some of these volumes. But on the volume side, so if you are -- why we are not looking here, we evaluate portions between our volumes and EBITDA that we way maintained because we really don't want to get into the volume game with just stopping the EBITDA, but are getting to a very lower-end segment and start competing with other non-level-playing steel players. So we will be very cautious of ramping up that's why we are giving a guidance that 20% -- at least 20% volume growth looks achievable for us at this stage because practically, we can do more volume, but in that case, we have to really drop bar getting into the segment which we really don't want to get into too much.
And it also depends on how the U.S. and the EU economy shapes up in the next coming months because still we are hearing, destocking is still going, there is still fear of recession. And so it's still not picked up to the level that was envisaged or expected. But as and when that picks up, we can also increase our volumes.
So just for clarification, you mentioned 2.15 million tonne to 2.2 million tonne and rolling volume, if any, will be over and above that.
No. Rolling volume is included.
Rolling is only a strategy of our raw material sourcing.
Yes, yes.
Okay. Fair enough. The second question is essentially the -- you have also -- the loan has also gone up to INR 500 crores to INR 5,000 crores of funding. Now I'm not sure why this funded -- I mean it can be an enabling resolution as well, but why [indiscernible] at this point in time when CapEx low, CapEx would be some kind of residual here and there. So I was not sure that what prompted this enabling resolution? Are you planning to acquire something -- or I mean just a quick comment on that, that would be great?
Yes. So just to give you full perspective. Now we have a one company listed that is a merger. Before merger, we had an enabling resolution of INR 3,500 crores in each entity, JSL and JSHL. So now we have a new entity which has come into the play, so we wanted to keep the approval at the level of INR 5,000 because JSHL approval is no more valid and JSHL debt has also unfolded.
This is to capture of any of the -- including the refinancing opportunity or any of the good opportunity which include the refinancing. So it's a more enabling resolution at this point, if you ask. Why this point? Because now there is a fast Board meeting of the, let's say, combined listed entity. So JSHL and JSL approval were together worth INR 7,000 crore. In fact, we are reducing the approval to INR 5,000 crores, the way to look at that.
Our next question comes from Rahul Jain with Systematix.
Congrats on a good set of numbers. So now that we have completed the major CapEx. And I think we only have the promo integration pending. So how should we look at volume a new project in the market segment? And can you also follow up strategy for CapEx numbers for this year?
CapEx number for FY '24 will be around INR 2,500 crore, which basically the two large CapEx includes the JUSL completing the JUSL acquisition and also the Indonesia one. It is some of the spillover CapEx coming on our project expansion from FY '23 also. So -- and the digital CapEx of that. And beside that sustain invest of around INR 2,500 crore CapEx in this year will still be there.
In terms of capacity expansion, we feel that at a 3 million tonne level, we are quite sufficient for the next 2 to 3 years. And depending on how the domestic market and export market progresses and grows then we'll take a call subsequently whether we need to further invest in more stainless steel capacity or not as of now. So sitting today, we are quite sufficient that for the next 2 to 3 years, the capacity will be sufficient because you're committing a 20% year-on-year volume growth in FY '24 and also 20%, 25% volume growth in FY '25.
Okay. Can you elaborate on the two investments that we have done, one is in the Indonesian -- how does it really help us on our overall business and in terms of margin supply. And also all this the NPI acquisition that we have done in terms of what the road map we have over there, are we looking to get big into long product prices?
Okay. Let me answer the Indonesia one first and -- Indonesia one, strategically, it gives us two edge. One is that it further brings more consistency and robustness into our margin profile. Because as you know, over a period of time, you would have seen we have a lot of margin consistency by doing the risk management of our underlying raw material sourcing and entire supply chain. And to be a completely agile model, gracing the order book with the corresponding raw materials.
Now still obviously nickel remains very volatile. So it gives us the further -- it will help us to get further consistently because whatever raw material fluctuation which happens and takes some time like to pass on to the customer, at least we'll be getting -- benefiting of that from this nickel output from this plant.
Second is that, it gives us -- the biggest one is that, it's more than this that it gives the raw material linkages and raw material security, which is very critical for us. So we will be able to meet our NPI requirements as per the need of this plant. So this is clearly a good edge and will be very value accretive for the business.
Very high IRR and payback period also.
Yes. Payback period will still be -- after once it starts, will be around 2.5 years. So maybe including construction period around 4, 4.5 years.
Sir, on the long product new strategy that we have in the acquisition you've done?
See, long product was definitely a new entry product. And the reason that we went into it is because our customers are demanding it more than anything else. And the customers demanding or getting into long products, having a quality brand name to enter. And with the vision of government and infrastructure, we feel that a lot of stainless steel is going to go into the infrastructure sector now and it would be consumed in the infrastructure segment. So looking at the future plan of the country, looking at the future plans of the Government of India, we went ahead with this long product transaction.
Our next question comes from Vikash Singh with.
Sir, I want to understand that if you look at quarter-on-quarter basis, our EBITDA percent jumps roughly about INR 4,000, but the raw material prices were also higher, while our realization was slightly lower. So what has contributed to this kind of the jump? Are there any one-offs?
See, from Q3 to Q4, one major change that happened was export duty was removed in Q3, end of Q3. So Q4 onwards, the export market again opened up for us, and we were able to book some orders at higher margin at H4 level which we were not able to do in the previous months. So that was one of the major reasons that led to this EBITDA increase.
So -- but that is not reflecting in our realization. So I was wondering if there is any other reason.
No. So like corresponding to the raw material price, you are right, there was some pressure on the margin still. So we have not been able to pass on immediately the entire raw material increase. That's the reason the corresponding realization, we are not showing that much of increase as compared to the raw material cost. So to that extent, there was some pressure on the margin. But I think there will always be some sort of time lag to this movement. So that was because of this reason.
Fair enough, sir. Sir, my second question, just attaching to this, So this kind of margin is sustainable or what kind of average guidance you would like to give us going forward?
Around INR 20,000 per tonne is achievable.
And this is our guidance. Since we are at the beginning of the year and still there are a lot of talk about U.S. debt crisis and all thing from considering that, we are saying that giving a big range of the margin for the full year which is INR 19,000 to INR 21,000.
Understood sir. Sir, my second question is concerned to JUSL. Since we are gaining activity there, but at the same time, some of our customers like JSL and Tata are getting their own rolling mills. So how do we look at the situation from their we will have the additional rolling outside the contracts? And how does it impact us in the near term?
For JUSL business model is not dependent at all on the outside rolling. In fact, if it comes, it always will be add-on EBITDA addition. So it's a business model which we have -- EBITDA which have delivered this time also as actually, of course without rolling. So I call some part of rolling initially, but not much. So it's not really at all dependent. It's not that the either capacity is idle it burned some cash, no. That's not the case because the JSL volume, it's quite sustainable tooling arrangement.
Understood, sir. And sir, just one last question. Looking at our CapEx and our cash flow right now, is this safer to assume that we will continue to pay down debt going forward also?
This year, not really. I would say the -- but the way to look at it, ratios not likely to deteriorate. However, because we have our FX outflow bunching up of INR 2,500 crore and in fact we have already reduced. If you see as compared to December number also, we have further reduced. So we have actually buildup some of the -- in net debt, we build up some of the cash, which will also go for funding these INR 2,500 crores. So INR 2,500 crores will largely in, but intermittent would go up by around INR 500 crore to INR 700 crore.
Our next question comes from Ashish Kejriwal with Nuvama Wealth Management.
Many congratulations for good set of numbers. Sir, three questions for me. One is about the volume growth because you mentioned that now if the Europe revised, is it possible that export market revise, we can do better than what we are guiding right now in terms of volume in FY '24?
Yes, definitely. Yes, we see exports ticking up in U.S., u.S. economy and EU economy practically improving, then definitely, we can give a higher guidance because capacity we have, it is just depending on the market, we will ramp up after sure.
Okay. Okay And then certainly, obviously, in terms of balance sheet, we have sufficient or we have debt which is very much in control. And by looking at the cash flow and the guidance which we are giving for next 2 years in terms of volume as well as a EBITDA per tonne, definitely, there will be more free cash flows, which will be generated. So my question is not about the further expansion, but are you looking for any inorganic acquisition also sometimes like Indonesia or something within the stainless steel, anything else?
Definitely anything that comes on the cards related to our business, we are not going to get into any kind of diversification. Where we are entering into some FMCG or IT or some kind of those type of businesses. Anything that helps us increasing our stainless steel business or reducing our cost or some raw material security, those are the areas we want to focus. We want to further strengthen our position, improve our quality, bring down cost. So anything that help us in these two, three areas is what we look at inorganic.
There is nothing on the card right now. Like we mentioned, we have just done this Indonesia investment, plus we also acquired Rathi Super Steel. So there is enough for us to go on to the next 1 year, 1.5 years at least. And if any good inorganic opportunity comes up in the country, then we definitely want to be participating in it related to our business.
Sure. And sir, lastly, because now you have said that not related to out businesses, some opportunity comes in. Related to that, we know that under promoters -- promoters Company, I think we are setting up one blast furnace, which costing some INR 4,000 crores plus, which earlier we were trying to get into JUSL, but now under promoter company. So my question is, one, is it possible to share how we are going to fund it? I understand that that's not under JSL, but understanding was the promoter's debt also is important for us. So my question is how we are going to fund it? And in future, do we think that 2 or 3 years down the line, once we commission that and because it's more remunerative for us in terms of lowering our costs, we will try to collaborate with JSL?
So JSL funding of that project, it's not really question of discussion here, but I can tell you it's broadly a two into one funded project. So promoters are putting their own equity and balance with that. The second question, we already replied that. Idea is that to make JSL as a more ESG -- on a -- high on ESG ofcourse. So We don't intend to have a blast furnace in JSL. Thats the reason it was -- the JSL was -- blast furnace was not put up over there. In fact, further to strengthen our ESG thing, what we have also said is that the new capacity expansion which we have done will be completely powered by renewable power. So there's nothing on the card right now that to bring back asset over here and it does not make any synergies also from the project.
No plans right now.
Our next question comes from Kirtan Mehta with BOB Capital Markets. .
Just wanted to confirm one part. In terms of the FY '24 guidance...
Kirtan, I'm sorry to interrupt you there, but we are not able to hear you clearly.
Is this better now?
Yes.
Yes. In terms of the volume guidance for 20% increase in this year or revenue increase of -- volume guidance of 20% increase, is it inclusive of the Rathi Super Steel Or would there be additional growth once that integrates?
No, it is not inclusive of Rathi. It is purely on product.
Rathi too early to -- in fact, we just started a smaller operation. I think this year, we don't see Rathi adding much into the profile we started 1 smaller mill project, but the larger operation will only start at the end of the year.
End of the year.
End of the financial year.
Right. And in terms of the volume guidance, what could be potential downside risk to our 20% guidance at this stage? My understand that the company is fully ready, but do you see any variables which would pull it down below 20% in any circumstances?
Not looking likely because anyway, stainless steel is growing at a very fast pace with the kind of investments coming in India for infrastructure, railways, other sectors. So it's not looking from a volume perspective. But yes, if now export does not pick up, I will still commit to the volume guidance, but yes, maybe margins can't come under pressure if export is not available to us. But other than that, I don't think so, there should be any reason for this.
Right. Just one more follow-up in just the volume mix, it is going to take across different segments like railway, automotive, would you be able to sort of share the FY '23 volume mix across different segments?
As a rule, We generally don't cater more than 15% to 18% to any sector. And with the volume also growing and the market also growing, I would say the percentage share in each sector is going to remain the same. But if anything specific changes, then I will ask the team to get back to you with some specifics. But generally, this is what it's looking like in the future as well.
Our next question comes from Sunil with Abakkus.
Congratulations. A few clarifications. Our current rate is now around INR 2,600 crores. And this INR 2,500 crores of CapEx, which we talked about includes the debt also of JUSL, is that correct?
No, that includes the net acquisition of JUSL. Not that JUSL debt, that INR 958 crores -- yes, yes, INR 900 crore, INR 958 crore acquisition.
INR 900 crores when you talk about JUSL, can you just clarify that would be like INR 900 crores of debt for the acquisition? And what else would go in that INR 2,500 crores.
I think, we talked about Indonesia investment.
Indonesia and -- JUSL.
That's for 2 year, that is what we have said.
Yes. So around INR 800 crores of investment could come because we are building this. Generally, these models get build up, but right now, it's INR 800 crores you have taken.
Over 2 years?
No, no, no. So total investment is around close to INR 1,300 crore to INR 1,400 crore depending on the currency, $157 million.
INR 1,700 crore?
INR 1,400 crore -- INR 1,300 crore.
Okay. That's it right, it's not INR 2,500 crore, it's 1,300 crore.
No, no. Okay. Let me put it, Indonesia investment will be around INR 1,300 crore.
Over 2 years, or INR 800 crore will be this year, INR 500 crore next year?
Correct.
Yes. See, it's a construction base milestone payment depending on the progress. So right now, INR 800 crore this year.
Yes plus INR 900 crore for JUSL equity. So that is INR 1,700 crore.
That's right. And then around -- there is a spillover CapEx, what we -- if you the earlier CapEx we set INR 200 crore CapEx was anyway to be done in FY '24 for the expansion because last installment. And there is also some spillover fancy payment which will further around INR 400 crore. And then there is a maintenance and sustenance CapEx, which includes INR 75 crore of Rathi investment, further investment, around INR 400 crore to INR 500 crore, around INR 500 crore. So the number INR 2,600 crore, we are guiding INR 2,500 crore.
So basically, this will be met from internal accruals of Jindal Stainless, but there will be also a reduction of debt in JUSL out of their own internal accruals, right?
Absolutely.
Then the overall debt should go down. It will not go up now. You're guiding that it will go up by INR 500 crore, it should go down by INR 500 crore, INR 600 crore.
See, depending on the payment timing, that's why we said today intermittent period, it will go up because we are not saying that...
Talking about end of the year not intermittent period.
End of the year, depending on the payment may come back to the same level, I would say.
Our next question comes from Chetan Shah with Capital.
Just one small product question. So give us some sense on what's happening in the international market? Because you kind of explained that we are a little weary to give an aggressive guidance both in terms of volume growth in export front and also in terms of the EBITDA per tonne, looking at how the global situation as of now. So if we assume any stready state of normalized situation in next quarter or so, do you think that we will revise it into the second half of the current financial year? And any sense of FY '25 because now we have a reasonable clarity of cash flow and the CapEx outflow for all that this which is there on the platter, how do we see FY '25 both in terms of the volume and in terms of the size and look of the balance sheet that we will helpful?
So Chetan, I think because the way these economies are progressing, it's month-to-month kind of situation. Already from our customers, we are getting positive signals on. But until it does not start reflecting, I don't want to overcome it. But definitely, we do feel that we can do better if we the economy pick up. Till now the rent situation is still in the destocking mode. Even though the levels have come down, that is why the discussion with our customers and already starting booking orders and negotiations has started. But has it gone to, lets say, pre export duty levels, No, it has not reached the level at all. So that's why I don't want to over commit right now.
FY '25 from a volume guidance, we definitely do a 20% to 25% jump over FY '24. That looks quite clear to us. And by that time, it's quite clear, even the U.S. and Europe be up and running by them, for sure, if not in H2 of this year.
Sir, one small clarification. In terms of we do in JUSL, last year because our at JSL was not ready. So we were doing a training part of the business. do you think if there is a reasonable demand and ramp up happening up to the mark or there is a mismatch, we would not be hesitant to do the same even in the current year?
Absolutely, absolutely. Because I mean, either through our capacity or through these means we will meet our volume linings. It's market further doing, then [Foreign Language].
Correct. Correct. And sir, last question, more of book thing. Can you share 200, 300 and 400 series mix for the full financial year. How was the looks like?
So for full financial year, 200 series was -- I'm talking about combined entity level, 34% was 200 series, 300 was 43% and 400 was 24%.
[Operator Instructions] Our next question comes from the line of Ritesh Shah with Investment Capital Services.
Couple of questions. First, Mantri sir, the guidance what you gave was INR 90 to INR 2,100 per tonne. I would presume it excludes anything from JUSL. Would that the case?
Yes, yes. Absolutely.
Perfect. Coming to JUSL, is it possible if you could give the tonnage number that we had for '22 and '23? And how do we look at that number for '24 and '25, any broad ballpark numbers?
See, JUSL, and for this year should be taken exactly what we will be doing at Jajpur plant, but now we do sometimes on the trading volumes. So I think what you put the EBITDA number to the , which will be helpful because that will go on the combined tuning of JSL as a EBITDA pattern announcement.
So what we are saying is on the JSL tonnage what we are guiding, JUSL stood around INR 3,500 EBITDA per tonne additionally. So JUSL maybe doing around INR 800 crore to INR 850 crore of EBITDA this year, depending on what kind of volumes we.
What do you have numbers for FY '23, will be around like 1.4 million, 1.5 million, 1.6 million tonnes. I'm just trying to look at the spreads over there. I think in the past we entered a number of around INR 4,500, INR 5,000, INR 6,000. So I was just trying to pencil in that number and the extra comp out of it.
Yes. So around 1.4 million tonne the volume in JUSL for FY '23. But frankly, it does not give you any of the insight because it has also some of the direct selling of the gold load material, which we had a small cold load unit loan. So the margins are very different. That's why I think blended number of EBITDA will be more impacted, but this will that the number.
Right. absolutely by your guidance, but what I wanted to understand is the confidence that we get to actually to extra volumes even JUSl is also commissioning I think by tthe second of this year fiscal. I'm not sure of how much financial debt for JSHL. So the question is when do we take the confidence of the number of INR 700 crores, INR 800 crores, INR 900 crores?
So I cant say, so this year, if you see, we are not banking on any of the external tolling arrangement, let me I think that the number guidance that you're giving is you're purely based on the JSL business model. Anything which comes we really run on making -- and you are absolutely right, it may not come also because everybody is building their own capacity, but they're not certain still pipeline. But anyways irrespective of that -- see, we did INR 700 crores plus this year. And next year, we are expecting to be INR 712 crore. Next year with the volume increase of our own, we are expecting at least INR 800 crores to INR 850 crores is achievable EBITDA in JUSL.
Sure. And my last question was to Mr. Abhyuday. Sir, we have spoken a lot about ESG, but -- and I absolutely bind to the economic rationale of the Indonesian investment with viable payback. But when you look at ESG aspect over here, I think the very, very naughty. And if you look at the global OEMs, automotive guys, they have been actually running away from the Indonesian nickel [indiscernible] given what is the quality of ore and secondly, how power and carbon intensive the product class. So I understand it might fall in Scope 3 emission but honestly, I look at Scope 1, 2 and 3 together. So how do the balance this particular act of?
Ritesh, these are the challenges that we are not competing with the Europeans. So we are competing with the Chinese and Indonesians. So when we are competing with these players, then we have to go to that level and that degree of costing to compete with them because there are limited markets available. There is protection everywhere that is coming in despite ESG there or not there. So we actually need to continuously keep working on our cost, keep working and we're working on both sides.
So it's not that we are only working on cost reduction and not working on ESG. So everything that we're doing from power, energy is all going to be on renewable. So definitely a concern area. It is something that we are already taking it up with Government of India also and there's a lot of discussion happening at EU levels. So we have to look at the whole world in totality. We cannot look at you and not look at our Chinese counterparts.
So looking at this angle and looking at the way the Chinese companies, Indonesian companies have started dominating the market, we felt that some level of security was separately required. So with that logic and with the payback period, we felt that it makes sense to go for the transaction despite the scope 3 issue. And scope 3 also, like you're saying, even from what EU has announced, scope 3 is still quite some time away. They are also even in 2026 when duty does start, it will be basically on scope 1 and scope 2 then scope 3 will come into play much later on. So that would be sort of my two cents of this.
And just to extend the question. So how are we actually looking to be the CBM implementation 1 month that actually implemented a October this year. So where are you on carbon-intensity on scope 1 and 2? And what are the benchmarks that you have right now? And will we attract any penalties pertinent to Europe?
So as of now till 2026, it will not get any duty. It is now from October onwards is when you to start disclosing and when is when all the reporting is done. So we are also waiting for who is the authority, who is the identified agency who will come and start calculating all these things. From our side already, if you go on our website also, we have clearly come up and come out with our own sustainability -- and sustainability over for us, we've already come up with our guidance on it which is available for the public to go and see, and we are already reporting we're already coming out with all our bookings. We're already working from scope-free perspective.
So on the other hand, if I take out in Indonesia thing, already working with all our suppliers that if you need to be in business with our in 2025, already, these are areas that you guys to start working on ESG because we don't want any or we want to reduce the border of scope 3 impact. From all areas, it's a very, very important topic. It will be a concern area for us. But we're keeping in line and we're keeping an one eye on what's happening in EU. So the minute all these this clarified, we have a full team sitting, waiting, geared up to work -- working towards it.
And Ritesh, also add that also there are discussions that recently already have electric cast furnace and scrap based production. So the target setting and should be commensurate with that. So because it should not happen that it becomes a winner skirt. That if somebody has already put up the facilities like that and then start competing on the guys who have blast furnace based facility. So there are multiple discussions which are happening and these European players are also similar production based. So they are I'm talking about the stainless steel. So there are multiple decisions happening on the backgrownd also this. So from our perspective, and we are electric cast furnance based and scrap based production. I think it looks quite comfortable as compared to the other guys.
And just add a further thing there is -- I mean, world's biggest deal technology conference that happens once in I think that happens once in, I think, 3 or 4 years, we have a very, very big team this time going and the major focus is the green steel. So at the end of, let's say, June and July, we will have further sort of information because is going to be based in Europe, working on green steel, working on all these reporting metrics. So it's a journey. There is whatever we could do until now, we have already completed and we have done. And as and when more questions are asked and demanded from EU5, we will keep answering.
Perfect. And just to squeeze one. I think Indonesian investment makes a lot of sense if I look at headline numbers. I think the CapEx intensity was around $14,500. What we understand the EBITDA was here could be around $4000 to $5000. But honestly, I don't understand how this number of $4,000 to $5,000 actually comes in because the payment is so beautiful for 4 years. I think a lot of will be actually jumping in over here. So is it something that we have nothing on the risk side? That's what I wanted to understand over here.
You're right. Actually, that and frankly, this is -- this model got assemble over a period of time. And so they have like nickle industry you already talked this is optimistic company. And they have been operating more network. There are more than 100 kilns. We are only taking two kilns. So it's very well established models. It's like a tolling management sort of model, which has been proven like that.
So therefore, the payback looks attractive and obviously, the thing is that we remain 51%. So it's not that everybody could grow to that type of partnership and we wanted that way because we don't want to get into the operations of that. It was for us thats a more and advantage, and we were looking at that sort of investment.
But any specific reason to do it now because I understand the technology is like 60 years old. Payback is too good. So why is it now? And are there specific risks that we should be aware of pertaining to technology or elementary or political?
No, I think there's no technology impact. There is tax holiday over there, but -- so even the tax holiday was we have built in this plant, the optionality to get into nickel [indiscernible]. In fact, which goes into the EVs battery chain. So some of the ESG will also get nullfied from there.
Tax holiday for us will continue.
Tax holiday for us will continue even if they have a NPI based tax holiday withdrawn, which I think we have already done it do. So we have already been there about it and we have built the optionality to get into the nickle industry. The cost include VAT.
Our next question comes from with Financial.
So first of all, congratulations with the entire team for an extraordinary execution of the large decades now in the first dividend after 15 years. congratulation on that.
Thank you.
Sir, I have a couple of questions. Firstly, you mentioned in the middle of the call that there are any cost-saving measures for increasing some value addition in our portfolio. we could look at that. So is there anything on the cards that you are working on?
That I said from an acquisition perspective. But in terms of cost saving measures, it's everyday phenomena we continuously because we are -- we are continuously working reducing, we have to compete, like I was saying with the Chinese and Indonesian and our country is totally open to Chinese dumping. So we don't work on cost, there will always -- we'll always be at a back foot. And one area where you're making huge inroads is on the logistics side because that is one area that also Government of India is committing that huge reduction in logistic costs will come. And so we are also keeping ourselves ready and in line and meeting a lot of efficiencies from that angle.
Okay. So nothing evident that we are working on. If there's any opportunity?
No. No, there is no acquisition in terms of that will help us in reducing costs, but technology adoption and technology usage is continuous thing. obviously entering into new sectors, growing the market. So all that is a continuous thing. I mean this is nothing new.
Net new rates last thing we shared I think that if an elevation competitive lower cost new grid.
Centimeter, railway for your nuclear sector, defense sector, I mean every area.
So new grids are continues as part of our R&D pipeline.
Got it. Got it. Okay. Sir, my second question is on the exports. We've done 13% exports in the quarter just after the dollar export. That's a good figure, I guess, among the we are on the higher end. So where are we geographies to any specific profile that we are seeing good demand for?
No export we mainly major export is 300 and 400 series for us. And with the rise and the brand name and the quality that we have, we are kind of covering the entire gamut of the world. So our main focus is always in U.S. and EU, but now Middle East has picked up for our for us. South America has picked up for us. Korea -- South Korea is picked for us in a very big way. So these are new markets also we're looking at plus as always, the major focus is on EU and U.S.
Okay. Okay. Sure. And what would be the export percentage for FY '24. on this 2.15 to 2.2 million tonne?
You can say around 15% to 20%, depending on how the markets perform and they pick up, but at the end of the year, around 15% to 20%, you can say.
Sure. Okay. And sir, my last question is on the expansion from there have been a couple of in the call and previously also. So just wanted a sense what would be the time line if we decide to say, on day 1 of the calendar year? What would be the time line to execute another million tonne at Jajpur if you could give us some sense?
So I mean, in terms of when we after defining the construction phase can take up to almost 1.5 to 2 years, but it's the decision point, we will only start exploring next year, I can say. Right now, we have enough on the cards. So only next year, we will start the discussion when or how or where to expand.
Right. Okay. Sir, just one more question. What would be the maintenance CapEx for -- on an annual basis, including JUSL for FY '24, if you can say?
It will be around INR 500 crores. Typically it ranges between...
Including the U.S.?
Maintenance or sustenance? include both actually, not only maintenance.
Okay. Our next question comes from Amit Dixit with Securities.
I have two questions. One is on Rathi Super power, Now we are going to invest [ INR 75 crores ]this year on this asset. So what kind of headline numbers we can expect in terms of volume, in terms of EBITDA return, if you can mention?
See, Amit, this year, not likely because the larger capacity, as we said, will be only operational by end of this year. Having said that good news that some part we could have start earlier than our expectation also. So let's see how it progresses well. But right now, I will say, let's not take anything on the EBITDA and the top line this year. The capacity is around 152,000 metric tonnes. Obviously, there are various approvals and all this thing will have to work it out on bringing this entire cap into the production. So let's wait for some time and we'll give you more time guidance as we progress on this.
And what was the mix in the quarter 200, 300, 400?
This quarter was around 200 was around 35%, 300 was 42%, and 400 was 20%.
And this year, of course, the guys a mix has been a little bit towards 200, maybe because export duty possibly was there -- for bulk of the year. Now going ahead, I would expect that you be focusing on domestic market more, export proportion will -- is likely to be 15%. And domestic market gives you that much [indiscernible] -- 200, 300, 400 maybe. So I guess in FY '24, we will go back to, let me say, FY '22 as 200 went below 20%. Is it correct assumption?
So Amit, I just wanted to highlight one point here. So this mix was as Mr. Mantri just said, its a merged entity mix, so including JSL and JSHL. So if you recall JSHL the share of 200 series always used to be on the higher side. So when you merge the two entities, so this is a mix which it looks like. And to answer your question, I would request Mr. Mantri to answer.
So that's one is that because of the combined JSHL 200 bit for the higher and obviously some part of the year because we are increasing the volume also so 200 series will also be there. So I would say mix is very dynamic. Our focus always remains...
EBITDA maximization -- so it can it can fluctuate and vary. But absolutely because Hisar has a big 200 series that's why it's looking higher now.
We have it because of specialized products. Our for three quarters, it had higher EBITDA per tonne than JSL. So the point I was trying to make actually that the 19,000 to 21,000 per tonne guidance that you have in FY Q4, we achieved a higher number than the INR 21,610. So don't you think this is a little bit of conservative guidance at this point in time? Or you're waiting for certain things to unfold and then maybe you can mayve after guidance 2 quarters down the line?
Amit, you know us for very long. We are always a conservative company. We like to perform rather than commit. So definitely, we feel we can do better. But looking at our situation, these are the guidance we would like to convey.
Our next question comes from the line of with Bhavin Chheda with Enam Holdings.
Congrats on excellent turnaround, one of the best turnarounds in the steel industry from restructuring, creating three, four companies and ultimately merging it when most of the companies have turnaround. So now a few questions on the merged entity, how it looks like. First is, if I understand sir, the payment of JUSL for 74% is pending, right, entire payment is pending, right, it will happen in first quarter, right?
Yes. So the connection will be completed in this quarter. I think we'll complete in next 2 to 3 weeks time.
Okay. So the starting debt which we should work on is INR 2,900 crores plus INR 1,900 crore, plus INR 950 crore, that's the right number, right?
No. I would say -- so net debt number of JSL was INR 2,600 crore -- INR 2,591 crore exactly. I'm giving the rounded off number.
Sir, subsidiary INR 380 crore also I'm counting.
Okay. Subsidiaries if you're counting, that's a INR 380 crore, but that's only working capital debt. Let me tell you, right? It's not...
But we include both. So including working capital, what's I'm trying to count.
Okay. So if you are saying that INR 2,971 crore will be the number.
INR 2,900 crore plus INR 1,956 crore is JUSL and plus INR 957 crore, you have to pay, right?
No, no. So INR 1,956 crore in JUSL is absolutely right. Now INR 950 crore, I'm not saying it will be the debt -- that INR 950 crore is included in the INR 2,500 crore number, which we said. And against that we said that how to fund this INR 2,500 crores, largely it will come from internal accruals. But during that intermittent period, depending on the timing, we can go that -- increase the debt by INR 500 crore to INR 700 crore.
Anurag, I'm coming to that. So starting so INR 2,500 crore CapEx guidance what you have given includes INR 950 crore payment to be made for JUSL 74%?
Yes.
Okay. So net of that, your overall CapEx is INR 1,500 crores, which includes Indonesia INR 700 crores?
Yes, around INR 750 crores to INR 800 crores.
INR 750 crore to INR 800 crore.
Right. So ex of Indonesia, stainless steel CapEx spending is just INR 700 crores, right?
Yes, it includes around INR 500 crore -- INR 400 crores is the pending CapEx for the previous expansions then we have close to INR 400 crores to INR 500 crores sustenance and maintenance CapEx, which includes Rathi CapEx of INR 75 crores.
Sure. And then in the opening remarks, you indicated that I think you're expecting INR 500 crore plus that or largely flattish. On what debt number are you guiding this for March '24? Because there are too many numbers. What I look at it is I'm starting your April balance sheet at INR 5,700 crore debt. I don't know what debt number you will refer to. But by the end of first quarter, you will be roughly INR 5,700 crores, INR 5,800 crore debt.
So did you -- when you're mentioning that there would be no debt repayment or INR 400 crores, INR 500 crore, is it from that number or which number you're referring from?
Okay. So JSL and JUSL, let me put the -- because I'm confused with your number also, let me put my number also into play.
I'll just clarify, sir, INR 2,591 crore plus INR 380 crore is INR 2,971 crore right now at March '23. INR 950 crore anyway, you have to pay by June. So I'm adding that INR 950 crore , which comes to INR 3,921 and another INR 1,950 crore of JUSL, which will go into the company. So this makes it INR 5,873 crore I'm round out it to INR 5,900 crores. So I'm starting with INR 5,900 crore debt number, which will be a June 30 number, by June 30 when the JUSL transaction will be over. And from this number, how will your March '24 look like?
Because from this number, I'm expecting a substantial reduction. I don't know from which number you mean that there would be no reduction because on 2 million guidance, and INR 20,000 crore, INR 21,000 crore guidance, plus INR 700 crores, INR 800 crore in JUSL you're heading for INR 5,000 crores EBITDA and a CapEx of less than INR 1,000 crores. So there has to INR 2,000 crore, INR 2,500 crore repayment.
So if you are taking some INR 5, 900 crore number, it will be a reduction just to answer short because let me put your calculation, INR 950 crores, you are assuming that we'll be funding completely from debt. There is no debt.
[indiscernible] cash flow then I'm counting your cash flow from the EBITDA. Let's assume that you take the debt or whatever so then your operational cash flow will be used for debt repayment.
So from your number INR 5,900 crore you're taking, yes, there would be a reduction from that number.
And there will be substantial reduction. So one, when you meant INR 400 crores, INR 500 crores increase or decrease, which number you were taking for the debt? So I...
I believe INR 2,600 crore.
Yes. So when I said is that it was on a stand-alone basis of INR 2,600 crore and INR 1,956 crore.
Okay. From INR 2,600 crore, you said that you were looking at INR 400 crore, INR 500 crores increase. So basically, you're looking at a merged entity INR 3,000 crores debt by March '24. That is fine. That is my number also, but you were looking from INR 2,600-odd crores.
Yes, I think -- or maybe I'll put your number because I think you have put too many numbers. INR 5,900 crores you are taking the number, there would be debt reduction from that. We are not intending to reach INR 5,900 crores at all.
Okay. Okay. That's because you must have taken first quarter cash flow also which I take separately. I'm just looking at starting debt -- after the merger process is complete. Okay.
Right.
Okay. And just one last question. On JUSL, you were looking to improve this EBITDA number next year when it gets merged and your '19, '21 guidance doesn't include JUSL EBITDA. So that will be over and above the INR 20,000 or INR 20,000 per tonne EBITDA whatever you do.
Yes. So that will act around -- what we said is INR 3,500 crores of additional -- INR 3,500 EBITDA per tonne of additional EBITDA on combined on JSL volume.
JUSL, what volumes you are looking at?
No, the INR 3,500 crore is on based on JSL volumes.
Thank you -- ladies and gentlemen, we have reached the end of the question-and-answer session. I would now like to hand the conference over to the management for closing comments.
Thank you, everyone, for attending this call. It is our agility and sales and operation planning, extensive use of digitization of a faster and more efficient decision making across the value chain along with dynamic product mix, which helped us deliver robust performances. Going forward, we will continue to strategize business as per market dynamics. I hope we've been able to answer all your questions satisfactorily, and please feel free to contact our Investor Relations team for further clarification. Thank you so much. Have a good day.
Thank you, on behalf of Investment Capital Services, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.